India's logistics cost estimated at 7.8-8.9% of GDP in 2021-22

20 Dec 2023 CW Team

In the fiscal year 2021-22, India's logistics cost has been determined to be in the range of 7.8-8.9% of the gross domestic product (GDP), which is lower than previous private survey estimates exceeding 10%. The National Council of Applied Economic Research (NCAER) conducted this calculation as assigned by the Department for Promotion of Industry and Internal Trade (DPIIT). The World Bank has reviewed the methodology and recognised its appropriateness as a baseline, with the potential for future fine-tuning, according to government officials.

The logistics cost encompasses various components such as transportation, warehousing, storage, auxiliary support services, packaging, insurance, and other operational costs. DPIIT Secretary Rajesh Kumar Singh introduced the report titled "Logistics Cost in India: Assessment and Long-Term Framework," emphasising its pivotal role in optimising logistics efficiencies and enhancing India's global competitiveness. Singh highlighted the ongoing investments in physical and digital infrastructure, creating an enabling environment for obtaining reliable data for data-driven planning and policymaking.

Poonam Munjal, a professor at NCAER, described the calculation as a quick estimate and expressed the intention to refine the numbers further using more granular data. The government, currently relying on certain estimates, suggests that India's logistics cost is at 13-14% of GDP. The report aims to establish a credible framework for logistics cost estimates, capturing detailed data on an origin-destination (O-D) pair-wise, commodity-wise, and geography-wise basis.

DPIIT Special Secretary Sumita Dawra emphasised the serious implications of logistics cost on the country's manufacturing sector, export competitiveness, and global positioning. The government's effort is to move away from past estimates lacking a conclusive and scientific calculation framework and focus on a more data-driven approach for effective policymaking.

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