India’s Logistics Market Set to Grow: Key Developments and Future Projections
The Indian logistics market, valued at Rs 9 trillion in FY23, is expected to grow to Rs 13.4 trillion by FY28, with a CAGR of 8-9%. This growth is driven by structural changes, technological advancements, and government initiatives aimed at reducing logistics costs and improving infrastructure.
National Logistics Policy
Unveiled in September 2022, the National Logistics Policy aims to optimize India’s logistics landscape. It focuses on increasing the share of railways in freight movement, currently at 18%, through the development of dedicated freight corridors (DFCs), improving road infrastructure, and expanding inland waterways.
Infrastructure Improvements
The commissioning of DFCs, 96% complete as of April 2024, is set to enhance rail freight capacity and efficiency. The government’s push for port privatization has improved infrastructure and efficiency at Indian ports, benefiting major operators like Adani Ports and SEZ (APSEZ) and JSW Infrastructure.
Logistics Costs and Modal Mix
India’s logistics cost as a percentage of GDP is 14%, higher than the 8-9% in developed countries. Roads account for 71% of freight movement, contributing to high costs. The government has implemented initiatives like the Goods and Services Tax (GST) and invested in road infrastructure, inland waterways, and DFCs to reduce costs.
Market Segments and Growth
The logistics market includes road transport, rail transport, air cargo, multimodal logistics, and industrial warehousing. The domestic express logistics segment is projected to grow at a 14% CAGR over FY23-28, driven by e-commerce. Organized players, controlling 80% of the market, are expected to strengthen their position with policies like the e-way bill and GST. The less-than-truckload (LTL) segment in road transportation is also expected to grow, with a 10% CAGR, due to increased demand for smaller, frequent shipments.
Doubts Revealed
Logistics Market -: The logistics market involves the transportation and storage of goods. It includes everything from moving products from factories to warehouses and then to stores or customers.
Rs 9 trillion -: Rs 9 trillion is a way to express a very large amount of money in Indian Rupees. One trillion is equal to one lakh crore, which is a huge number.
FY23 -: FY23 stands for the financial year 2023. In India, a financial year starts on April 1st and ends on March 31st of the next year.
CAGR -: CAGR stands for Compound Annual Growth Rate. It shows how much something grows over a period of time, on average, each year.
National Logistics Policy -: The National Logistics Policy is a plan by the Indian government to make moving goods more efficient. It aims to improve transportation systems and reduce costs.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year.
GST -: GST stands for Goods and Services Tax. It is a tax in India that is applied to the sale of goods and services, making the tax system simpler.
E-commerce -: E-commerce refers to buying and selling goods or services using the internet. It includes online shopping websites like Amazon and Flipkart.