New Delhi: India's inter-state logistical logjam is curtailing the potential of the country's domestic market and the government should take steps like GST and National Common Market Commission to reduce these barriers, says a report by global financial services major UBS.
According to the report, the size and potential growth of India's domestic market should be a boon for Indian and international producers.
But road traffic, customs inefficiencies and state border check-post clearances have fractured the country's domestic market, it said.
"Road traffic accounts for three-fifths of all freight traffic in India, yet the average distance covered by trucks per day in India is well below that in more developed markets," the report said.
As per a World Bank analysis, trucks spend up to 25 percent of their time being stopped at check-posts, state border crossings and other regulatory stoppages and only 40 percent of the journey time is spent on the move.
"India does not need to match Brazilian truck speeds to generate growth," the report said, adding that cutting 20 percent off the difference in distance travelled per day would boost Indian truck productivity by 12 percent with knock-on effects throughout the production chain.
Smaller steps can make a difference to inter-state trade, said the report, adding that GST can be an important step towards reducing the barriers to inter-state trade.
"Although trade across state borders will still likely be taxed under GST, the simplified regime should ease tax compliance and reduce the layering of taxes upon taxes," UBS said.
Moreover, state governments could also help by deregulating. A National Common Market Commission is planned to co-ordinate in this space, it added.
