Why India Badly Needs A Ports Upgrade

This is one less talked about area that needs constant and more focused attention.

In a separate story published in India Tracker, it was stated how India achieving the milestone of $ one trillion in annual exports is no longer a pipe dream. Barring cataclysmic disruptions, exports of goods in the current financial year is scheduled to get very close to $ 500 billion. In addition, despite the fears of a recession stalking the leading economies of the world, services exports are expected to touch $ 370 billion in the same time period. That makes it $ 870 billion in total exports. On the flip side, as the Indian economy sustains its growth momentum, imports of a wide array of goods-apart from crude oil-are expected to rise rapidly not just in the current year, but also in the years ahead. For instance, while exports in June 2022 were valued at $ 40 billion, imports of goods in the same month were a staggering $ 65 billion. Trade already accounts for one third of the GDP of the Indian economy and as it integrates more and more with global supply chains through policies like the Production Linked Incentive Scheme, the volume as well as value of trade will keep going up.

Ironically, it is not cost competitiveness of exports or a slowdown in the growth prospects of the Indian economy or even a global recession that could throw a spanner in the works. If one factor could prove to be an impediment in the years ahead; t would be ports infrastructure. Globally, more than 85% of trade is conducted through ports and ships as air cargo is relatively more expensive and road cargo is feasible mostly between neighbours. As the accompanying chart shows, Indian ports are way behind those in other countries when it comes to handling cargo. In fact, for an economy that is the fifth largest in the world in dollar terms and the third largest in terms of purchasing power parity, the volume of cargo handled by Indian ports is abysmal compared to other countries. China alone handles almost ten times the cargo handled by India. Not a single Indian port finds a place in the top 20 busiest ports in the world when it comes to handling cargo traffic. Unless urgently fixed, ports infrastructure could stymie India’s integration with global supply chains.

The good news is that after decades of neglect, the government has been very pro active in promoting port infrastructure since 2015 when the Sagarmala project with an estimated investment that has been revised upwards to Rs 6.5 trillion, with large scale participation by private sector investors. The effects are visible on the ground. Ports capacity has gone up from 1.5 billion tons in 201 to about 2.6 billion tons in 2022. But when you start dreaming of trillions of dollars a year n trade, a cargo capacity of even 2.6 billion tons begins to look inadequate. Clearly, this is one less talked about area that needs constant and more focused attention.