The Union Budget 2022, presented by the FM Smt. Nirmala Sitharaman on February 1st has been perceived as positive and growth oriented by the stakeholders of the nation’s logistics sector.
The FM, during the budget, spelt out plans to take the Gati Shakti national master plan forward with an aim to spur the logistics infrastructure and allotted the plan its first outlay of Rs 20,000 crore for 2022-23.
“PM GatiShakti is a transformative approach for economic growth and sustainable development. The approach is driven by seven engines, namely, roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure. All seven engines will pull forward the economy in unison.”Smt. Nirmala Sitharamn, Finance Minster
The highly fragmented logistics industry in India is expected to see an accelerated progress owing to the government’s endeavor to encourage integrated logistics and multimodal connectivity.
Furthermore, the budget reforms and the increased budgetary allocations will bring India at par with the global supply chain networks and contribute to the Atmanirbhar Bharat vision of the country while reducing the nation’s supply chain and logistics cost from the present 13-14%.
The PM Gati Shakti master plan is a well thought out approach to boost the logistics industry. The announcement of the umbrella scheme that brings all-mode operators on a unified logistics interface platform (ULIP) will aid the efficient movement of goods.
As per experts, “The ULIP will reduce logistics cost and time, and at the same time assist just-in-time inventory management and eliminate tedious documentation. This integrated approach of infra development will also encourage and provide confidence to entrepreneurs, developers and institutional investors to further invest in the sector.”
The umbrella scheme will get more firepower with higher allocations across the board and will support technology adoption across multi-modal logistics’ operations, and streamline the data flow.. The one window platform set up to exchange data among all stakeholders will bring in more transparency and ensure ease of doing business for leading enterprises as well as Indian logistics startups. The development of multimodal logistics parks will further spur economic growth.
Under the PM Gati Shakti plan, the government also proposed the development of highways and expansion of the National Highway network by 25,000 km in 2022-23, which will further boost logistics connectivity and improve last-mile deliveries.
According to the Logistics Skill Council, the Indian logistics sector is valued at $150 billion, contributing 14.4% of the country’s GDP. The nation’s “lifeline” sector has lately been growing at a CAGR of 10.5%. While it is impossible to achieve robust economic growth without a vibrant and competitive logistics sector, India is said to be consistently losing ground due to the fragmented nature of the sector, which is a major bottleneck.
A report by Arthur D. Little and CII said higher logistics cost was the reason for the competitiveness gap of $180 billion in India, and the gap was likely to go up to $500 billion by 2030.
India at present has a logistics cost that’s 6-7% more than other developed nations. And, one of the primary reasons for this gap is the extensive use of road networks to transport goods, which is by far the most expensive way to transport goods.
The PM Gati Shakti is aimed at changing the status quo.