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.
"India does not need to match Brazilian truck speeds to generate growth," the report said, adding that cutting 20 per cent off the difference in distance travelled per day would boost Indian truck productivity by 12 per cent with knock-on effects throughout the production chain.
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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.
Moreover, state governments could also help by deregulating. A National Common Market Commission is planned to co-ordinate in this space, it added.