India’s Logistics costs estimated at 7.8-8.9% of GDP in 2021-22

The logistics cost in India for the fiscal year 2021-22 has been determined to be in the range of 7.8-8.9% of the gross domestic product (GDP), a figure lower than previous private survey estimates exceeding 10%. This calculation was conducted by the National Council of Applied Economic Research (NCAER), following a directive from the Department for Promotion of Industry and Internal Trade (DPIIT). The World Bank, after reviewing the methodology, has acknowledged the appropriateness of the baseline and framework, indicating the potential for future fine-tuning.

The computation of the cost involves various components such as transportation, warehousing, storage, auxiliary support services, packaging, insurance, and other operational expenses, drawing on secondary data sources.

DPIIT Secretary Rajesh Kumar Singh unveiled a report titled “Logistics Cost in India: Assessment and Long-Term Framework,” aiming to play a pivotal role in optimizing logistics efficiencies and bolstering India’s global competitiveness. The report lays the foundation for developing a credible framework to estimate logistics costs.

Singh emphasized the significant investments made by India in both physical and digital infrastructure, creating an environment conducive to obtaining reliable data for data-driven planning and policymaking. Poonam Munjal, a professor at NCAER, described the calculation as a quick estimate, indicating that further refinement would occur with more granular data.

Currently, the government relies on certain estimates, suggesting that India’s logistics cost is at 13-14% of GDP. The global context highlights diverse methodologies for calculating logistics costs at the macroeconomic level, with past estimates in India varying. The government argues that previous estimates lacked a conclusive and scientific framework. The current effort aims to capture detailed data on an “origin-destination (O-D) pair-wise, commodity-wise, geography-wise” basis.

DPIIT Special Secretary Sumita Dawra underscored the serious implications of logistics costs for India’s manufacturing sector, export competitiveness, and global positioning. Recognizing the lack of credible data in the public domain, Dawra stressed the need for a scientific logistics cost calculation framework.

R Dinesh, President of CII, praised the report as a timely initiative supporting India’s manufacturing sector. The report quantifies logistics costs and identifies their constituent components, aligning with India’s manufacturing goals.

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