Indian Logistics set to spread its wings, infrastructure and demand to act as catalysts

indian logistics

The Indian Logistics Market is currently valued at US$ 215 billion and owing to the increase in infrastructure and demand acting as a catalyst, it is forecasted to grow at a CAGR of 10.5% between 2019-2025. This growth is also reckoned due to recasting from unorganized to the organized sector of the industry, including warehousing and transportation.

The support from a stronger backbone, comprising of better infrastructure and operational reforms, would catapult logistics from being about transportation (majorly) and warehousing to a specialized function of the Indian economy.

The transport industry is highly unorganised with several small local fleet operators. With the elevated levels of complying to GST and similar reforms, the industry is anticipated to turn more organized. This will in turn make the domino fall towards increased appetite of foreign players to invest in the industry.

“Based on reforms undertaken over the last few years, the industry is expected to grow faster over the next few years. Some new business models like 3PL and Express Logistics would grow faster than the overall sector.”

Motilal Oswal Financial Services

In a post-pandemic world, the demand for end-to-end logistics has seen a boost, giving 3PL services a greater level of gravity, especially in the Indian economy. While all other supply chains were disrupted, the flow of essentials and pharmaceuticals remained particularly uninterrupted with the help of 3PL services. For instance, end-to-end ecommerce logistics solution provider Ecom Express saw an over 60 percent surge in order volumes in comparison to pre-pandemic times and ecommerce enabler ShipRocket also claimed a 100 percent growth. ShipRocket Founder and CEO Saahil Goel said the defining moment was when he was able to fulfil over 1,000 medicine orders in a week for a client whose stock was stuck in an Amazon warehouse.

Another thrust to the flight of Indian logistics industry comes with increasing investment (public and private) in Multimodal Logistics Parks. Recently, the Union Minister Nitin Gadkari announced that the government plans to establish 35 MMLPs throughout the nation, all of them being strategically located in vicinity of economic and freight corridors, ports, airports, SEZs and established industrial clusters. These MMLPs will also result in further integration of cold-chain logistics and warehousing, along with other technological developments like IoT, automation, blockchain technology, AI and robotics etc.

There have also been various efforts throughout the industry by private as well as public players, to ensure better sustainability in operations and fortify that it grows by the hour. According to the recently released report of NITI Aayog and Rocky Mountain Institute (RMI), titled ‘Fast Tracking Freight in India: A Roadmap for Clean and Cost-Effective Goods Transport’, India can save Rs 3.11 lakh crore worth of fuel by 2050 and reduce 10 gigatonnes of carbon dioxide by 2030 by deploying a clean and cost-effective mode of goods transportation.

There is enough evidence to substantiate that logistics has gained a rather mainstream position as an industry. As per the Economic Survey 2017-22, improving the sector will facilitate 10% decrease in indirect logistics cost leading to the growth of 5 to 8% in exports. Further, the worth of Indian logistics market would be around US$ 215 billion in next two years compared to about US$ 160 billion currently.

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