Warehousing

What are the key drivers of the booming warehousing demand in India?

Post By : Abhilash Shrivastava
Post Date : April 30, 2021
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Reading Time: 3 minutes

Warehousing acts as a pivotal part of any logistics value chain and enables quality safekeeping of goods at various stages within the supply chain system.

If we rewind by a few years, we will see that warehouses were only meant to store goods and usually housed in shabby, poorly-lit and dilapidated buildings with hardly any technological sophistication.

No wonder, those days have become a thing of the past as warehousing in India has transformed and evolved multi-fold with the absorption and integration of superior warehousing management techniques and cutting-edge technology.

With increased consumption and corresponding demand patterns across various sectors, warehousing space business is booming. In this article, we will try to dig deeper into the following catalysts behind this phenomenon:

Steady economic growth

India’s steady and consistent growth over the years has opened the doors of opportunities not only for key sectors of the economy but also for the general well-being. Blessed with increased revenues, companies are increasingly ploughing back their riches in expanding capabilities and building capacities in meeting the future challenges. Greater inflow of FDI, globalisation and foray of international players has made India a safe haven for investment and a hotspot of economic growth.

Government policies and simplification of taxes

With the government’s announcement of “Infrastructural status” to logistics sector, there is an evident spurt in investment in the warehousing domain. Furthermore, free trade warehousing zones and logistics parks are no less than a shot in the arm for warehouse and logistics industry. It has also helped exceed the warehousing demand nation-wide. Greater relaxations and liberalised outlook on trade coupled with rationalised and simplified tax regime has turned the India in single unified marketplace. Availability of land near industrial hubs along with speedy allocation of land through an efficient single-window-clearance system alongside easy loan disbursement at lower interest rates has also facilitated mushrooming of number of warehouses pan India.

Infrastructure and transportation

Government’s reformist and proactive stance, characterizes its resolve in building robust and well-connected infrastructure. Needless to say, it has bolstered the growth of the warehousing sector exponentially. Besides infrastructure, efficient transportation system has further boosted its prospects immensely. Now, supply and distribution channels are inter-linked and well-connected, even, in the interiors and the remotest parts of the country. With sound infrastructure backed up with agile multi-tier transportation system, it has contributed significantly in accelerating inter-city, intra-state and inter-state mobility in addition to reducing transit time.  

Technological advances

Technology helps in neutralising the lacunae and in amplifying the efficiencies of any system. Not so long ago, warehouses used to be considered just as a dingy, ill-lighted storage place, however, with the advent of modern technology solutions and evolving sophisticated tools, the term ‘warehouse’ is being rediscovered and redefined. With state-of-the-art-facilities accompanied with requisite global standard, green, well-ventilated, spacious, well-lit and optimised warehouses, it is now being conceptualized and built than ever before. And their integration with modern technological solutions like Automation, real-time tracking, RFID, Internet of Things (IoT), Robotics and Artificial Intelligence (AI) will further catapult them into the higher trajectory of growth.         

New potential sectors for growth

Indian economy is primarily a service-sector based economy which is well-supported by agricultural and manufacturing sector (Textile and auto/Auto ancillary) over the years, traditionally. However,the government’s big push towards Infrastructure, ‘Make-In-India’, ‘Digital India’ and a slew of other sweeping measures for boosting economy has paid rich dividends as other sectors such as information technology, telecommunications, healthcare, FMCG have triggered a rise in consumption, which has further resulted in augmented warehousing space demand.     

Geographical Trends: Rise of Tier-2 and 3 cities

Indian warehousing industry is experiencing a watershed at the moment and a corresponding paradigm shift is swamping it across geographies. Moreover, government initiatives combined with Covid-19 induced e-commerce boom and rise of tier 2 and 3 cities- as the possible warehousing alternatives – on the horizon, are tipped to be the reasons for the surge of high-end warehousing space demands equipped with A-grade facilities.

According to a report by JLL India Industrial Services, in 2019, the Indian warehousing sector registered a 15 percent Y-o-Y growth in total net absorption in Grade-A and B warehousing space across the top eight cities namely Delhi NCR followed by Mumbai, Bengaluru, Kolkata, Pune, Hyderabad, Chennai and Ahmedabad. Interestingly, the sector is now witnessing the rise of much smaller Tier 2 and 3 cities.

Even in the midst of the pandemic, smaller markets such as Coimbatore, Vapi, Guwahati, Ludhiana, Surat, Patna, Bhubaneshwar, Siliguri and Lucknow have created a lot of buzz and presented themselves as avenues of potential growth.  

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