India’s logistics cost at 7.97 percent of GDP : DPIIT

NEW DELHI : India’s logistics cost during 2023-24 turned out to be Rs 24.01 lakh crore, or 7.97 percent of the gross domestic product (GDP), according to a statement shared by the Department for Promotion of Industry and Internal Trade (DPIIT) on September 25, underscoring a slowdown in its pace of growth owing to Centre’s recent initiatives.

“This is a significant development as until now, logistics costs in India were often misrepresented, with commonly cited figures of 13-14 percent of GDP derived from external studies or partial datasets. This led to inconsistent estimates, causing confusion among policymakers and global stakeholders. This is the first time that the government has undertaken such a study,” said Shri Sanjiv, Joint Secretary, DPIIT.

The report, prepared by NCAER (National Council of Applied Economic Research) for DPIIT, stated that estimates derived for the previous five years show that the pace of growth in the logistics cost is gradually slowing down.

“Slowing down of the growth in logistics cost is a desirable thing. This may be attributed to several initiatives such as PM Gati Shakti National Master Plan; dedicated freight corridors; Sagarmala project; integrated check posts; and development of the unified logistics interface platform,” Sanjiv said.

The report said that as per current assessment, the logistics costs in India are estimated at about 7.97 percent of total GDP. Officials said the logistics costs in Indonesia were relatively high at 24 percent of GDP, while in South Korea they were much lower at around 8 percent. In 2023, China estimated its logistics costs as 14.4 percent of its GDP.

The report provides a comprehensive framework by capturing logistics costs across different transport modes, product categories, and firm sizes. It also presented estimates of freight cost per tonne-kilometre and highlighted the role of multi-modality in improving efficiency.

“Rail logistics emerged as a cost-efficient mode, with an average cost of Rs 1.96 per tonne per km, significantly lower than road transport (Rs 11.03), in cases where the first/last mile of the consignment is not taken into consideration,” the report said.

“Air transportation is the most expensive, albeit the fastest, mode of freight transportation, averaging Rs 72 per tonne per km, which largely limits its use to high-value, time-sensitive commodities,” the report added.