Rupee Depreciation: Challenges for Indian logistics Sector

Rupee Depreciation Challenges for Indian logistics fieldAbhinav GoyalArticleRupee wear and tear creates challenges for Indian logistics orbitDepreciation ofIndian Rupeeagainst theUS vaulting horsehas created a challenging environment for theIndian logistics vault of heaven, owing to the change magnitude speak tos of operation for both world(prenominal) shipping companiesand thedomestic transportation companies, and change magnitude woos of work for give notice users (manufacturing and distribution companies) within the country.The challenges for logistics end users are primarily in case of multinationalshipmentssinceimportersand exportersneed to pay the shipping charges in US Dollars and hence, extra amount has to be paid for the same shipments, makinginternational raftless productive for the companies. On the export front, Indian exporters bequeath be viewed as the most worth competitive , however, they go out be faced with high pack costs, afterward scoottin g their profit margins. Owing to the risk of losing international customers to competing exporters from other international food markets, Indian exporters may be forced absorb the profit in freight charges and work with trim margins. In the event of failure or capability to absorb such additional freight costs, the exporters and importers may avoid/abstain from international trade.This could look at to an overall decline in the international trade volumes from India that would prove to be challenging for the shipping and freight forwarding companies. Especially for the shipping companies focus on Indian industries, a decline in international trade volumes from the country would result in idle capacity or shipments with not-fully loaded ships, resulting in lower revenues as well as high operational costs per customer consignment.On the domestic front, Rupee Depreciation against US Dollar would lead to increase in displace costs (already increased once within last 2 weeks), th usly resulting in higher operational costs for cargo transporters, which would invariably be passed by them to the end users. In this case end users are on the losing side referable to the impact of depreciation. In cases where logistics service providers (LSPs) and users are bound in long term contracts with charge revisions permitted only once in a year or a half year, service providers have to absorb /bear the increased costs of trading operations and hence are homogeneously to incur erosion in profits or even losses in some cases.LSPs with business interests in port terminals are likely to benefit to some extent, assumption that a significant share of shipping and port related services are charged in dollars, but that gains could also be negated by the decreased trade volumes. The sharp increase in the price of air travel turbine has already resulted in a proportional examine in airfare. Air freight services are premium logistics services and pull up stakes now be even costlier owing the increased fuel cost.The impact is not only on LSPs and end users, but also on the end consumers of goods due to the cascading effect. In majority of the cases, however, the depreciating rupee largely affects end consumers of imported goods.The LSPs and end-users alike may involve to work on decreased margins for a short period of time with the intent to spare their customers from increased prices, however, this depart not be sustainable in the long term. Eventually, the increase cost of logistics services will be passed down to the end consumer. On the whole, the depreciation of the Indian Rupee against the US Dollar will impact all the key stakeholders of the logistics sector in India. The primary impact of this will be borne by the LSPs, particularly the transporters and the freight forwarders, and the end-users.COMMENTARYThe depreciation of indian rupee against US dollar has demanding hit each sector of the thriftiness .One such sector is Logistic sector whe re the cost of production has increased invariably and revenues have decreased .This article is the study of pathetic conditon of logistic service provider .In India road transport has occupied a pivotal position in all the transport formation existing in India .The sector is growing at the rate of 10% per annum1. There are some(prenominal) factors attributed to the growth of logistic sector in India such as rapid growth of many sectors like FMCG , retail , pharnmaceuticals and automobiles and the change in taxation system by the governement .The sectors of aviation , mining and consumer goods are spend a huge amount of m integrityy in this sector . The market has more competiton now than earlier be hunting expedition of the concept of outsourcing and this has make positive impact on logistic sector in India.The Indian logistic sector is facing a number of problems today which includes infrastructure in India and it is the main hindrance in the development of this sector .Poor infrastructure includes bad road conditions , problems with railways , inland water transport , domestic aviation , lack of proper connectivity and incapable ports are posing challenges for this sector . The loopholes in infrastruture has made the cost per consummation veryu high for the logistic sector in India and this has caused several other problems such as low economy of scale , the companie can not hire skilled labours and the industries are widely fragmented . In india one of the major problem faced by this sector ins the scattered customer base .Recently this sector if posing the challenge of depreciation of rupee (the make out in the value of rupee in the market ) against dolar as it has not only made international shipping very costly but has made a bad impact on domestic transportation very costly .Depreciation has increased the cost per transaction .In case of international shipments the fall in the value of ruppe will increase the cost of freight which will reduce th e profit margin as the exporters will be compelled to absorb the rise in price and thus they will be less interested in getting more contracts .Eventually thebusiness will be hit hardbusiness will be hit hard .Graph 1 shows the impact of depreciation on the international shipment The decline in trade volumes will result in will result in idle capacity which will cause low income for the sector and high cost of operations .In the country the depreciation will increase the cost of fuel and this will make the service costlirr for the customers who will be paying money in the end thus the business will become less lucrative for the owners .In some cases the companies work on contract basis and with the higher operational cost the companies may end up reaping loss only.The sector has hope of earning profit from ports if the volume of trade is high while if the volume will be lower the company will again end up getting loss only .A rise in the price of air turbines will cause a rise in th e price of airfares which will subsequently lead to the rise in cost per transaction.All the above discussed reasons will cause a fall in aggregate demand of logistic services in the economy.Graph 2 shows that the AD will fall if the depreciation will continue thus leading to more loss for logistic companies .The brass can play a key role in helping logistic sector in this time of great challenge .There are need of stringent measure for solving the problem of depreciation in the country .The government can also reduce the tax rates so as to make this service cheaper for the national and international consumers .1. http//logisticsweek.com/column/2013/04/challenges-faced-in-logistics-sector-in-india/