Indian logistics market to reach Rs 13.4 trillion by FY28

04 Oct 2024 CW Team

This growth is driven by structural shifts, technological advancements, and government initiatives aimed at lowering logistics costs and enhancing infrastructure. The National Logistics Policy, launched in September 2022, aims to optimize India's logistics framework, focusing on increasing the railways' share in freight movement—currently at 18%—through the development of dedicated freight corridors (DFCs), enhancing road infrastructure, and expanding inland waterways.

As of April 2024, the commissioning of DFCs is 96% complete and is expected to enhance the capacity and efficiency of rail freight, boosting its share in the overall logistics mix. Additionally, 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.

Currently, India's logistics costs account for 14% of its GDP, significantly higher than the 8-9% range seen in developed countries. The skewed modal mix, with road transport making up 71% of freight movement, contributes to these elevated costs, while railways and waterways hold a smaller share.

To address these inefficiencies, the government has implemented key initiatives such as the Goods and Services Tax (GST) and has heavily invested in road infrastructure, inland waterways, and DFCs. These measures aim to reduce the logistics cost-to-GDP ratio to 8-9% in the coming years, aligning India with global standards.

The logistics sector is highly diverse, encompassing road transport, rail transport, air cargo, multimodal logistics, and industrial warehousing. The domestic express logistics segment is projected to grow even faster, with a 14% CAGR over FY23-28, driven largely by the expansion of e-commerce.

Organized players, who currently hold around 80% of the market, are expected to strengthen their dominance, leveraging government policies like the e-way bill and GST. Furthermore, the less-than-truckload (LTL) segment in road transportation is also anticipated to grow, with a projected 10% CAGR, driven by rising demand for smaller and more frequent shipments that bypass warehouse storage to reach retailers directly.

(ET)

The Indian logistics market, which was valued at Rs 9 trillion in FY23, is anticipated to expand significantly, reaching Rs 13.4 trillion by FY28, reflecting a compounded annual growth rate (CAGR) of 8-9%, according to a recent report by Motilal Oswal. This growth is driven by structural shifts, technological advancements, and government initiatives aimed at lowering logistics costs and enhancing infrastructure. The National Logistics Policy, launched in September 2022, aims to optimize India's logistics framework, focusing on increasing the railways' share in freight movement—currently at 18%—through the development of dedicated freight corridors (DFCs), enhancing road infrastructure, and expanding inland waterways. As of April 2024, the commissioning of DFCs is 96% complete and is expected to enhance the capacity and efficiency of rail freight, boosting its share in the overall logistics mix. Additionally, 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. Currently, India's logistics costs account for 14% of its GDP, significantly higher than the 8-9% range seen in developed countries. The skewed modal mix, with road transport making up 71% of freight movement, contributes to these elevated costs, while railways and waterways hold a smaller share. To address these inefficiencies, the government has implemented key initiatives such as the Goods and Services Tax (GST) and has heavily invested in road infrastructure, inland waterways, and DFCs. These measures aim to reduce the logistics cost-to-GDP ratio to 8-9% in the coming years, aligning India with global standards. The logistics sector is highly diverse, encompassing road transport, rail transport, air cargo, multimodal logistics, and industrial warehousing. The domestic express logistics segment is projected to grow even faster, with a 14% CAGR over FY23-28, driven largely by the expansion of e-commerce. Organized players, who currently hold around 80% of the market, are expected to strengthen their dominance, leveraging government policies like the e-way bill and GST. Furthermore, the less-than-truckload (LTL) segment in road transportation is also anticipated to grow, with a projected 10% CAGR, driven by rising demand for smaller and more frequent shipments that bypass warehouse storage to reach retailers directly. (ET)

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