India's logistics industry is a powerhouse in motion. As the nation's economy surges, its logistics sector is forecast to reach new heights in 2024. Fueled by e-commerce, government initiatives, and technological advancements, this industry presents a treasure trove of business potential. This article explores the key trends shaping India's logistics landscape in 2024, unveils the investment opportunities for businesses of all sizes, and analyzes the factors propelling this sector towards an exciting future.
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Table of Contents
India: Basic Information
Area: India covers a total area of 3,287,263 square kilometres.
Population: As of the 2023 estimate, India is the most populous country in the world, with approximately 1,428,627,663 people.
Capital: The capital city of India is New Delhi.
Currency: The official currency of India is the Indian rupee (₹).
Time Zone: India follows Indian Standard Time (IST), which is UTC +05:30. Daylight Saving Time (DST) is not observed.
International Membership:
European Union (EU)
North Atlantic Treaty Organization (NATO)
Organisation for Economic Co-operation and Development (OECD).
International Domain Suffix: India's domain suffix is .in.
Country Calling Code: To call India, use the +91 country calling code.
Official Languages: Hindi and English.
Recognised Regional Languages: India recognises 22 languages at the state level, including Assamese, Bengali, Gujarati, Kannada, Malayalam, Marathi, Odia, Punjabi, Tamil, Telugu, Urdu, and more.
Indian Economy
India's global economic integration has led to substantial growth despite a contraction in real GDP in FY20/21 due to the COVID-19 pandemic. India's economy comprises agriculture, manufacturing, and a rapidly growing service sector, with rice, wheat, and cotton being major crops that employ a significant portion of the workforce. Between 2011 and 2019, India reduced extreme poverty by half, but the pace has slowed, particularly during the COVID-19 pandemic. India aims to achieve high-income status by 2047, marking its centenary of independence while also addressing climate change challenges and achieving net-zero emissions by 2070.
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Exports of goods and services (% of GDP) in India were reported at 22.79 % in 2022, the World Bank collection of development indicators, compiled from officially recognised sources. India - Exports of goods and services (% of GDP) - actual values, historical data, forecasts and projections
Indian import and export with the world - Timeline
Services Trade
Indian services trade - global import and export
Current State of India’s Logistics Industry
Source: https://www.ibef.org/industry/ports-india-shipping/infographic
India's logistics industry is poised for significant growth, but the adequacy of its infrastructure remains a critical concern. Let's delve into this.
India's logistics market, valued at $435.43 billion in 2023, is projected to reach $650.52 billion by 2028, growing at an 8.3% CAGR, contributing 5% to the country's GDP and creating jobs for 2.2 crore Indians. India's logistics infrastructure is facing challenges such as insufficiency, inadequate equipment and technology, and inadequate design, which are hindering its ability to handle expected growth rates of 7 to 8% over the next decade.
India has identified four pillars to strengthen its logistics industry: integrating logistics services, enhancing efficient transport infrastructure, meeting core sector logistics needs, and developing international competitiveness. These initiatives aim to streamline end-to-end services, enhance connectivity through various modes, and focus on critical sectors like agriculture, manufacturing, and retail.
India has a unique opportunity to address infrastructure gaps by investing in modernising ports, improving connectivity, and adopting advanced technologies. Sustainable logistics systems, de-risked infrastructure projects, and efficient land acquisition processes are essential for future development.
In summary, while India faces challenges, strategic investments and policy reforms can pave the way for a logistics infrastructure that accommodates future growth and global competitiveness.
The Indian logistics market was valued at US$ 282.3 Billion in 2023. expect the Indian logistics market to exhibit a CAGR of 7.85% during 2024-2032. The Indian logistics market is primarily driven by the growth of automated material handling equipment, drones, and driverless vehicles for improved operational efficiency. The Indian logistics market is categorised into 2PL, 3PL, and 4PL models, with 3PL currently holding the majority of the market share. The Indian logistics market is categorised into roadways, seaways, railways, and airways, with roadways currently dominating the market.
The Indian logistics market is categorised into various end uses, with manufacturing currently holding the largest market share, followed by consumer goods, retail, food and beverages, IT hardware, healthcare, chemicals, construction, automotive, telecom, oil and gas. The Indian logistics market is categorised into North India, West and Central India, South India, and East India, with West and Central India currently dominating. (Source: imarcgroup based in the UK).
Data compiled from ey.com and mordorinteligence.com
The EY report predicts India's economy will reach $26 trillion by FY48, with the transportation and logistics sector playing a crucial role in supporting this rapid growth over the next 25 years. India faces unique challenges due to its large population and geographical presence. It lags behind BRICS countries in efficiency and has a 14% logistics cost as a percentage of GDP, compared to the BRICS average of 11%.
The industry is undergoing digital transformation, utilising technologies like IoT, blockchain, and AI to improve efficiency. Investments in modern infrastructure, such as warehouses and transportation networks, are also being made. The e-commerce boom has heightened the demand for logistics services, and innovative last-mile delivery solutions are being explored.
Excluded are freight insurance (included in insurance services); goods procured in ports by nonresident carriers (included in goods); maintenance and repairs on transport equipment (included in maintenance and repair services n.i.e.); and repairs of railway facilities, harbours, and airfield facilities (included in construction).
The Indian government plans to decrease logistics costs from 14.4% to 9-10% of GDP through the National Logistics Policy, aiming for seamless goods transport. Despite challenges, India presents opportunities for growth and innovation in the logistics sector. Modern warehousing and distribution centres are needed for e-commerce and omni-channel retailing. Multimodal transportation is prioritised, and infrastructure development is being invested. Despite supply chain bottlenecks and inflation, the sector remains vital for India's economic growth.
Importance of Logistics in Facilitating Trade and Economic Growth
Logistics, the backbone of global trade, is crucial for economic growth and ensuring the smooth movement of goods and services. Let's delve into its significance.
Efficient Supply Chain Management is crucial for managing the flow of goods from production to consumption, reducing lead times and stockouts. It enhances operational efficiency and fosters trade relations through efficient delivery, transportation, warehousing, and inventory management, leading to cost savings and improved profit margins.
Efficient logistics expands businesses' reach, taps into new customer bases, and bridges geographical gaps. Responsive logistics enhances competitiveness, while innovative technologies like IoT, AI, and blockchain improve agility, keeping companies ahead in the market.
The logistics sector promotes job creation, economic development, and environmental sustainability through efficient route planning, multimodal transport, and green initiatives while also contributing to local economies through warehouses, distribution centres, and transport services.
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Future of the India’s Logistics Industry
The India Freight and Logistics Market is expected to reach USD 317.26 billion in 2024 and grow at a CAGR of 8.83% to reach USD 484.43 billion by 2029. In 2024, the Freight Transport segment accounts for the largest share by logistics function. In 2024, the Freight Forwarding segment accounts for the fastest-growing logistics function in the India Freight and Logistics Market. The above figures are sourced from mordorintelligence.com.
Total Value of India's Exports to Slovenia
India's total exports to Slovenia in the fiscal year 2021-22 amounted to USD 494.39 million. This trade relationship reflects a diverse range of commodities across various sectors, fostering economic ties between the two nations. Notably, India exports 856 commodities identified under 69 chapters across 19 sectors to Slovenia. Some of the top trading sectors include chemicals, machinery and electrical equipment, aircraft, and textiles.
India's Exports to Slovenia were US$596.52 Million in 2022, according to the United Nations COMTRADE database on international trade. India Exports to Slovenia - data, historical chart and statistics - was last updated in March of 2024.
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Major Exporting Industries in India to Slovenia
India has a diverse range of export sectors, and its trade relations with Slovenia reflect this diversity. Let's delve into the details:
Chemicals: India exports various chemical products to Slovenia, contributing significantly to bilateral trade. (US$60.30 Million in 2022-2023)
Machinery and Electrical Equipment: This sector plays a crucial role in India's exports to Slovenia. (US$93.79 Million in 2022-2023)
Textiles: India's textile industry is also prominently featured in its exports to Slovenia. (US$2.34 Million in 2022-2023)
Base Metals: Metal products, including base metals, form part of India's export portfolio. (US$36.91 Million in 2022-2023)
Aircraft: The aviation sector is another area of trade between the two countries. (US$19.18 Million in 2022-2023).
The above figures are based on data from investindia.gov.in and tradingeconomics.com.
Specific Commodities that India Exports to Slovenia
Now, let's explore some specific commodities that India exports to Slovenia.
Packaged Medicaments: Valued at $69.3 million (2021), these pharmaceutical products are a significant export.
Nitrogen Heterocyclic Compounds: These compounds contributed $63.7 million to India's exports in 2022.
Raw Aluminium: India exported raw aluminium worth $41 million to Slovenia in 2021.
The above figures are based on data from oec.world and investindia.gov.in.
Total Value of India's Imports from Slovenia
India's total imports from Slovenia in the fiscal year 2021-22 were USD 303.24 million. This trade relationship reflects a diverse range of commodities across various sectors, fostering economic ties between the two nations. Notably, India imports 703 commodities identified under 57 chapters across 19 sectors from Slovenia. Some of the top trading sectors include chemicals, machinery and electrical equipment, aircraft, and textiles.
Major Importing Industries in India from Slovenia
India Imports from Slovenia were US$302.75 Million in 2022, according to the United Nations COMTRADE database on international trade. India Imports from Slovenia - data, historical chart and statistics - was last updated in March of 2024.
India's trade relations with Slovenia involve a diverse range of commodities. Let's explore the major importing industries from Slovenia to India.
Automobile Components: India imports automobile components from Slovenia, contributing to its automotive industry. (US$1445 Million in 2022-2023)
Pharmaceuticals: The pharmaceutical sector is another significant area of import from Slovenia. (United Nations COMTRADE database on international trade in February 2024)
Chemicals: Chemical products play a crucial role in India's imports from Slovenia (US$297.83 Million in 2022-2023).
Tourism: While not an industry per se, tourism-related goods and services are part of the bilateral trade.
Innovative Sectors: Slovenia's innovative sectors, including sustainable mobility, smart homes, well-being, smart electronics, special materials, and nano-technologies, contribute to India's imports.
These industries and sectors foster economic ties between the two nations, enhancing collaboration and exchange of goods and expertise.
The above figures are based on data from investindia.gov.in and tradingeconomics.com.
Specific Commodities that India Imports from Slovenia
India imports a diverse range of commodities from Slovenia. Here are some specific items:
Organic Chemicals: Valued at $81.2 million (2021).
Pharmaceutical Products: These contribute significantly to India's imports from Slovenia, with a value of $66.05 million (2022).
Nuclear Reactors, Boilers, Machinery, etc.: This sector plays a crucial role in India's imports from Slovenia, with a value of $12.99 million (2022).
Iron and Steel: India also imports iron and steel products from Slovenia, amounting to $11.8 million (2022).
Coffee, Tea, Mate, and Spices: These commodities are part of the bilateral trade, with a value of $11.77 million (2022).
The above figures are based on data from oec.world and investindia.gov.in. These imports contribute to the economic ties between the two nations, fostering collaboration and exchange of goods.
India's Logistics Industry Compared to Other Countries
India's logistics industry faces unique challenges due to its substantial geographic presence and the second-largest population in the world. However, when it comes to efficiency, India lags behind other BRICS countries. Let's delve into some key points:
Logistics Cost: The logistics cost per GDP in BRICS countries is slightly higher in India at 13%, attributed to an inefficient modal mixture, particularly in the road segment, and India's over-dependence on road freight. Developed countries maintain logistics costs at 7-8% of GDP, while other BRIC nations manage it at 9-10 per cent.
Third-Party Logistics (3PL) Revenue: India's significant third-party logistics revenue in 2020 contributed significantly to the global logistics market, but cost inefficiencies still need to be addressed.
In summary, while India has made progress, there's room for improvement in optimising logistics processes and reducing costs to match global standards.
Insights on India's Significant Third-Party Logistics
In the financial year 2020, India's third-party logistics (3PL) market was approximately 580 billion Indian rupees. Projections indicate that this market will grow to 1.2 trillion rupees by 2025, with a compound annual growth rate (CAGR) of around 16 to 18 per cent. This substantial growth reflects the increasing demand for logistics services in India.
For further context, let's explore some additional statistics related to India's logistics industry:
Global Logistics Market Size
The global logistics market was approximately 10.41 trillion USD in 2020. India's contribution to this market is significant, given its large population and economic activities.
Distribution of Total Logistics Costs in India (2022)
The distribution of total logistics costs in India varies by type:
Transportation: 65 percent
Warehousing: 20 percent
Inventory Carrying: 15 percent
Rail Freight
The average railway freight rate per metric ton in India has been tracked over the years. In 2022, it stood at 1,200 Indian rupees ($15 approx.) per metric ton.
Air Freight
In 2021, air travel was the most expensive form of transportation in India, costing an average of about 18 Indian rupees ($0.225) per metric ton kilometre.
Prior to COVID-19, the cost of international air cargo varied based on the type of cargo and available space, usually ranging from $2.50 to $5.00 per kilogram. However, as a result of COVID-19-related disruptions, prices skyrocketed in February 2020, rising to a range of $4.00 to $8.00 per kilogram. Although prices have decreased to between $3.00 and $7.00 per kilogram as of early 2023, they are still higher than pre-pandemic levels.
Ship Freight
Ship freight rates vary based on route, cargo type, and other factors, such as container shipping from India to the USA. For accurate pricing, it's crucial to check current rates with specific shipping lines or freight forwarders.
Road Freight
India's road transport is a vital mode for freight logistics, with an average cost of 3.6 rupees ($0.045) per metric kilometre in 2021. Online freight calculators and platforms like TruckBhada offer real-time information on available loads and truck rates.
Cold Chain Industry
The cold chain industry greatly aids in the preservation of perishable goods. The cold chain sector in India is expected to expand between 2022 and 2027. These figures demonstrate the dynamic nature of India's logistics industry and stress how critical effective logistics management is to the country's development and prosperity.
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Key Challenges and Opportunities in India’s Logistics Industry
We will now explore the challenges and opportunities in India's logistics industry.
Challenges
India’s logistics industry faces challenges due to insufficient infrastructure, fragmented industry, regulatory hurdles, and a lack of skilled labour. Insufficient road, rail, and port connectivity, especially in rural areas, hinders efficient goods movement. Complex permits, taxes, and documentation regulations create bottlenecks and increase costs. Skilled labour is needed for warehouse operations and transportation, while limited adoption of digital technologies like IoT, AI, and blockchain hinders efficiency. Investment in IT infrastructure is necessary for real-time tracking and optimisation.
Opportunities
The e-commerce boom has heightened the need for efficient logistics services, allowing companies to capitalise on this opportunity by offering seamless delivery solutions. Multimodal Transportation involves integrating rail, road, air, and waterways for integrated logistics while developing dry ports and inland container depots for efficient cargo handling. The demand for modern warehouses and temperature-controlled storage is increasing, along with investment in cold chain logistics for perishable goods.
The Indian government's initiative to boost manufacturing offers logistics opportunities, emphasising the importance of efficient supply chains for domestic production. The focus is on attracting FDI in logistics infrastructure and fostering public-private partnerships (PPPs) for the development of logistics hubs. The summary of the above is that overcoming obstacles through policy reforms, technology adoption, and skill development can significantly enhance India's logistics capabilities.
Challenges Faced by Indian Companies Exporting to Slovenia
Exporting from India to Slovenia presents several challenges for Indian companies. Let's delve into some of the key issues.
Lack of Transparency: The decision-making processes used in Slovenian commerce and economy are opaque. Because of this opacity, it may be difficult for Indian exporters to comprehend the nuances of doing business in Slovenia and to effectively navigate the market.
Bureaucratic Procedures: Protracted bureaucratic processes can impede the free flow of exports. Administrative obstacles, paperwork, and approvals can cause delays for Indian businesses. For trade to be efficient, these procedures must be streamlined.
Opaque Tender Processes: Participating in public tenders can be challenging for Indian exporters due to Slovenia's sometimes opaque tendering system. Fair competition and transparency are necessary for level playing fields.
Taxation and Regulatory Burdens: Slovenia's regulatory framework and taxation may not always be clear-cut or uniform. Indian businesses must be aware of local tax regulations, compliance standards, and any modifications that may have an effect on their business.
Currency Fluctuations: Exchange rate fluctuations can impact financial transactions. When doing business with Slovenian counterparts, Indian exporters must control exchange risk.
Access to Export Credit: Indian exporters frequently encounter difficulties getting export credit. Working capital management requires financial assistance, particularly in international trade.
Cultural Differences: Resolving cultural differences and adjusting to them are necessary for productive business partnerships. Indian businesses that export to Slovenia ought to be cognizant of the cultural variations in business practices, communication styles, and negotiation strategies.
Market Research and Insights: Inaccurate market data can be detrimental to exporters. Indian businesses require current information on market trends, demand patterns, and consumer preferences in Slovenia.
Trade Barriers and Tariffs: Tariffs and trade barriers can raise costs and cause uncertainty for exporters when countries get into trade disputes. Complying with intricate regulations calls for knowledge and resources.
Supply Chain Disruptions: The COVID-19 pandemic and the blockade of the Suez Canal have disrupted global supply chains. These disruptions impact the timely delivery and availability of goods for international markets.
In summary, Indian companies exporting to Slovenia need to address these challenges by staying informed, building strong networks, and seeking professional guidance to navigate the intricacies of cross-border trade.
Rapidly Growing Sectors in India
Here are some of the rapidly growing sectors in India.
Technology and IT Services: The sector is experiencing rapid growth due to the global surge in digital transformation and the growing demand for IT services.
Renewable Energy: India's renewable energy sector is experiencing significant growth, ranking fourth globally in renewable energy capacity, wind power, and solar power.
Healthcare and Pharmaceuticals: The rising demand for healthcare services in India is fueled by an ageing population, chronic illnesses, and disposable income growth exacerbated by the COVID-19 pandemic.
E-commerce and Retail: The e-commerce sector in India is experiencing a surge due to digital transformation fueled by increased internet penetration and smartphone usage.
Agri-Tech and Organic Farming: Technological advancements in agriculture are driving growth, with organic farming gaining popularity due to growing health and wellness awareness.
Manufacturing and Electric Vehicles: The growth of this sector is being driven by the Indian government's 'Make in India' initiative and the global shift towards electric vehicles.
Role of Government Policies and Initiatives in India’s Logistics Industry
Government policies significantly influence India’s logistics industry, crucial for trade, commerce, and economic development, with key areas where these policies have significantly impacted.
Infrastructure Development: The government has implemented initiatives like the Bharatmala and Sagarmala Project to improve road and port connectivity, enhance freight movement efficiency, and reduce transportation costs.
Tax Reforms: The 2017 GST introduced in India significantly impacted the logistics industry, enabling faster freight movement, reducing turnaround times, and resulting in substantial cost savings for logistics firms.
Growth of E-commerce and Digitisation: The government is promoting digitalisation through initiatives like the Digital India campaign, focusing on online logistics platforms for improved tracking, transparency, and efficiency in last-mile delivery.
Skill Development and Training: The government has implemented policies focusing on skill development and training to address labour shortages and enhance workforce quality in the sector.
The National Logistic Policy and Gati Shakti programme are expected to boost India's global competitiveness in the logistics and supply chain sector, underscoring the vital role of government policies in its growth.
How Does India's Logistics Industry Compare to Other Countries?
India's logistics industry is undergoing significant changes, driven by robust economic growth and technological advancements. Here is some insight into India's logistics industry compared to other countries.
Modal Mix: India heavily relies on road transportation for 60-65% of goods, compared to 25-30% in developed countries, due to limited inland waterways, coastal shipping, and minimal rail containerisation.
Logistics Costs: India ranks 44th in the World Bank's Logistics Index due to its comparatively high logistics costs, which make up 13–14% of GDP, as opposed to developed countries' 7-8% and other BRIC countries' 9–10%.
Challenges and Opportunities: India's logistics industry is thriving despite infrastructure gaps and modal imbalances, thanks to government initiatives, industrial corridors, freight projects, and logistics companies fostering transportation ecosystems and integrating digital solutions.
Comparison with Other Countries: India faces challenges in reducing logistics costs, while Thailand, Vietnam, and China are making progress in this area despite the sector's rapid growth.
Read More About: Logistics Sector in India & National Logistics Policy
In summary, India's logistics industry is at a tipping point, with opportunities for transformation and optimisation. As the country invests in infrastructure and embraces digitalisation, it can enhance its position on the global logistics stage.
Improving India’s Logistics Industry
India's logistics industry is vital for economic growth and global trade. To enhance its efficiency and competitiveness, several strategies can be implemented:
Infrastructure Development: Investing in rail freight corridors can enhance logistics efficiency by streamlining cargo movement across the country and improving multi-modal connectivity between rail, road, air, and sea.
Digitalisation: The company is enhancing coordination, real-time tracking, and data sharing through digital logistics systems, standardising physical assets, and benchmarking service quality standards.
Human Resource Development: The initiative aims to improve logistics skills by providing professional training and capacity building, as well as collaborating with state governments to align policies and streamline operations.
Sustainability: Green logistics promotes eco-friendly practices, energy-efficient transportation, and waste reduction, while efficient logistics parks optimise storage and distribution.
Policy Support: The Logistics Efficiency Enhancement Programme aims to enhance efficiency by streamlining processes, reducing paperwork, and tailoring sectoral plans to industries like pharmaceuticals, agriculture, and e-commerce.
By embracing these strategies, India can transform its logistics sector, reduce costs, and contribute significantly to its economic growth.
Infrastructure Projects Underway in India
India is embarking on several ambitious infrastructure projects that promise to transform its urban landscape. Here are some noteworthy ones:
Mumbai Trans Harbour Link
The Mumbai Trans Harbour Link, the longest sea bridge in India, will connect Mumbai city with mainland Navi Mumbai. Located nearly 22 km, the six-lane bridge aims to improve connectivity and economic development in the Mumbai Metropolitan Region Development Authority.
Cost: Approximately Rs.18,000 crore ($225 million approx.)
Navi Mumbai International Airport
Adani Airports Holdings Ltd is developing and operating Navi Mumbai International Airport, aiming to enhance capacity in the Mumbai Metropolitan Region. Phase 1, set to be completed by 2024, will allow the airport to handle 20 million passengers annually, reaching 60 million passengers and 800,000 tons of cargo handling annually.
Cost: Approximately Rs. 17,000 crore ($212 million approx.)
Railway Line to Ladakh
A railway line to the high-altitude areas of Ladakh is in progress, aiming to improve connectivity to this strategically important region.
Cost: Approximately Rs. 83,360 crore ($10.42 billion approx.)
Railroad Tunnel Beneath the River Brahmaputra
This ambitious project involves constructing a rail tunnel beneath the mighty Brahmaputra River to enhance connectivity in the northeastern region of India.
Cost: Approximately Rs. 6000 crore ($75 million approx.)
Bullet Train Project (Mumbai–Ahmedabad)
The high-speed bullet train connecting Mumbai and Ahmedabad is under development, promising faster travel between these major cities.
Cost: Approximately Rs. 1.1lakh crore ($15 billion approx.)
Arunachal Frontier Highway
The Arunachal Frontier Highway aims to improve road connectivity in the northeastern state of Arunachal Pradesh.
Cost: Approximately Rs. 6728 crore ($900 million approx.)
These projects represent India's commitment to modernising its infrastructure and fostering economic growth.
Conclusion
India’s logistics industry, which influences over 13% of the country's GDP, remains the unseen backbone of India's economic engine. India's electric vehicle (EV) sales reached one million in the first nine months of 2023, a significant increase from the year-long record set in 2022. The trend in the logistics sector is a significant shift towards eco-friendly transport options. India’s logistics industry is projected to reach USD 317.26 billion by 2024, growing at an 8.83% CAGR and reaching USD 484.43 billion by 2029. India has to adopt and adhere to the nation's overall development within the framework of sustainability.
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