Indian logistics sector: High on delivery, low on cost
NEW DELHI : For the logistics sector, the year gone by was marked by efforts to move closer to the goals envisaged by the National Logistic Policy (NLP) in 2022. Following India’s elevation to the 38th ranking among 139 nations in the World Bank Index in 2023, the focus in 2024 was on reducing logistics cost from the prevailing 10-14 per cent.
The Economic Survey 2023-24 states that the Centre launched the National Logistics Policy and the PM Gati Shakti National Master Plan (in 2021) to boost efficiency and lower logistics costs, alongside digital reforms like the Unified Logistics Interface Platform (ULIP) and the Logistics Data Bank.
The electrification of the short railway lines connecting railway yards to inland container depots and container freight stations has facilitated faster movement and release of wagons by the Land Ports Authority of India (LPAI); additionally, the NLP Marine policy was launched for port-related logistics.
Since the launch of the NLP, over 614 entities have registered on ULIP, with 106 private companies signing non-disclosure agreements (NDAs); 142 companies have cumulatively submitted 382 use cases for ULIP, including data exchange, document digitisation and process automation; and 57 applications have been made live, as of September 2023, to facilitate logistical requirements such as cross-border trade, last-mile delivery optimisation, and reverse logistics.
The Goods and Services Tax (GST) has played a remarkable role in reducing logistics cost. The ‘one nation, one tax’ regime has cut the waiting time of trucks at State borders, thereby reducing travel time by nearly 30 per cent. This, in turn, has reduced logistics cost and increased the average distance covered by trucks to 300-325 km from 225 km, the survey said.
A report by the National Council of Applied Economic Research in December 2023 shows that logistics cost declined by 0.8-0.9 percentage points of GDP between FY14 and FY22. The improvement in logistics performance is reflected at the State-level too.
Supply Chain requirements
Logistics is now a booming sector, given its crucial role in supply chains — whether road, rail, air, waterways or warehouses. Experts remain bullish on the sector’s future prospects.
Mr. Rampraveen Swaminathan, Managing Director and CEO of Mahindra Logistics Ltd, says the industry underwent transformative changes in 2024, driven by macro trends such as deeper digital adoption, and an intensified focus on risk management.
Government-led initiatives like Gati Shakti, One Network for Digital Commerce (ONDC), and ULIP have further empowered the sector to meet evolving customer expectations, he says. Combined with the China Plus One strategy (diversifying manufacturing and sourcing operations beyond China), India’s position as a critical player in the global supply chain ecosystem has been reinforced.
“As we enter 2025, the logistics sector is poised for significant growth, supported by rising data transparency and advanced digitisation. Supportive policies in the warehousing sector, including grant of infrastructure status and expanded foreign direct investment opportunities, are accelerating the development of multi-client warehousing facilities,” he says.
“As the logistics landscape evolves, the 11.1 per cent increase in capital expenditure for infrastructure signals the significant growth opportunities in the sector, driving India’s ambition of becoming a $5-trillion economy by 2027″, Mr. Swaminathan says.
Skilling Needs
According to Mr. Mahesh Fogla, Executive Director, Patel Integrated Logistics Limited, the robust growth in the logistics sector in 2024 was driven by a 12 per cent annual expansion rate, increasing domestic consumption, and government-backed initiatives like Gati Shakti and NLP. The sector, valued at $250 billion and contributing 14 per cent to India’s GDP, demonstrated resilience as it transitioned from an unorganised to a structured industry, he says.
He lists key advancements such as infrastructure modernisation and the rollout of employee-linked incentive schemes, which addressed skill gaps and encouraged job creation. He calls for more efforts towards streamlining operations and enhancing workforce skills to fully unlock the sector’s potential.
E-commerce growth, demand for faster delivery, and export expansion driven by the productivity-linked incentive scheme will amplify goods movement, positioning India to capitalise on global trade opportunities, he says. He also foresees that government initiatives such as UDAN (to promote regional air connectivity) and NLP, alongside investments in technology, infrastructure, and workforce development will cut logistics cost by 4-5 per cent, enhancing India’s competitiveness in global markets.
Mr. Ketan Kulkarni, Deputy Managing Director, Gati Express and Supply Chain, echoes this, saying, “Enhancing connectivity, achieving cost-efficiency, and building resilience and agility through technology adoption and capacity building have been the key drivers as the logistics industry continues to enable India’s vision for Viksit Bharat 2047.”
Multimodal Strength
Progress in rail and waterway freight movement, alongside extensive highway construction, have heralded a new era of multi-modal connectivity, strengthening India’s position as a rising global economic powerhouse, Mr. Kulkarni says.
Thanks to the NLP, the national maritime portal Sagar Sethu is now online, the Sagar Ankalan portal to monitor port deficiencies is in place, the Coastal Shipping Bill has been enacted, and a study has been launched to measure logistics cost in India, says Mr. Rajesh Menon, a maritime expert.
What remains to be done, according to him, includes technology integration to further reduce logistics cost, measuring the ease of doing business on the ground, and bringing to fruition the maritime connectivity projects identified in the Union Budget with an outlay of ₹75,000 crore. The Indian Port Bill awaits implementation, while the transition from land-based to coastal transportation needs to be hastened, Mr. Menon says.