The Rise of Logistics and Transportation in India
Summary
The logistics industry in India is growing at a pace of 8-10% and is expected to reach US$ 215 billion in the next two years. India’s rank in the Logistics Performance Index Global Ranking jumped from 54th in 2014 to 35th in 2016. The government of India is working on establishing a new logistics plan, and tech-enabled start-ups have enormous scope to grow in the industry.
The inventory automation industry is projected to expand by 10-12%, and warehousing is a dominant trend in the Indian logistics industry. The government aims to reduce logistics costs from 14.4% of India’s GDP to 10% in the next four years.
The logistics industry in India is on a large course of development. The Indian logistics industry is anticipated to develop at a pace of 8-10% over the medium term, according to the national rating agency ICRA. This is an improvement over the 7.8% annual compound growth rate (CAGR) at which the sector has grown over the past five years. India’s logistics industry is estimated at around US$ 160 billion at the moment. The industry is anticipated to profit from GST application and reach US$ 215 billion over the next two years, according to the 2017-18 Economic Survey.
The Boom
The logistics and transportation sector, which is reflected in the worldwide rankings, has shown significant growth for the last few years. According to the World Bank’s 2016 Logistics Performance Index Global Ranking, India jumped from 54th general logistics performance in 2014 to 35th in 2016. The study also showed that on all six parameters used in the ranking, India’s logistics industry has enhanced its efficiency. This is an enormous 20-rank jump and shows the sector’s development, including the rise in demand for GPS fleet management services.
The industry is gaining a lot of investment and the sector will boost job creation as an outcome of the transformations and transformations driven by these investments. Experts predict that by 2022 it could be the biggest job creator.
More than 22 million individuals in the nation are presently working in the industry. The study also stresses that enhancing the industry would lead to a 10% reduction in indirect costs, leading to a 5-8% increase in exports.
The Helping Hand
The government of India has announced it is working on the strategy to establish the country’s fresh logistics plan. The aim is to develop and implement by 2035 the most cost-effective technique of transporting products.
The objective of the strategy is to prepare a correct integrated logistics plan. Within the Department of Commerce, the new logistics division is working on this domestic integrated plan to identify and iron out any current sector bottlenecks and spaces.
That’s great news for the industry. It will also encourage the software-enabled logistics industry start-ups as they can provide seamless motion of products across the nation.
The Motivators
India’s logistics industry is a sector on the rise and it is driven by various variables towards development and boom.
Logistics development is two-sided–driven by the supply of demand. With the financial recovery, growth driven by demand is reinforced and advantages from GST introduction. According to the rating agency ICRA, the savings in car turnaround time were about 18-20 percent after GST application.
Besides, outsourcing to integrated players of non-core activities such as warehousing and related activities leads to the strengthening of organized players, which in turn is good for the industry in the long term. Industrial consumption picking is another driver of development in the logistics industry in India driven by demand.
The supply-led development leaders include improved logistics facilities, integrated logistics, and the birth of countless logistics start-ups, particularly tech-led start-ups. “Tech-enabled startups have an enormous scope to grow as well as drive the sector’s development,” according to an industry specialist. Not only do they attract massive investment, but they also have the potential to create trouble-free export processes by reducing needless paperwork, thus reducing delivery delays.
Trends
Delhi-NCR, Mumbai, Chennai, and Bangalore dominated the supply chain space requirement with a 50% share, according to the study of the true estate consultancy CBRE titled’ 2018 Asia Pacific Real Estate Market Outlook.’ Although the larger towns were also on the growth spurt with Hyderabad, Kolkata and Pune’s share of the total transacted room rose to 49 percent in 2017 compared to 25 percent in 2016.
Another central trend is the choice for big warehouses that enables a better process of automation. The Indian inventory automation industry is projected to expand by 10-12 percent to US$ 3.49 billion by 2020, according to the CBRE study.
Warehousing is another dominant trend in the Indian logistics industry as an appealing investment. Among other main investors are Morgan Stanley, Ascendas-Swingbridge and Warburg Pincus. The investment burst in the industry leads to fresh and improved warehousing facilities being developed.
Way Forward
The coming years for the Indian logistics sector will shine even brighter, according to CRISIL. The study company indicates that India’s logistics industry, which stood at Rs 6.4 trillion in FY17, will expand at a CAGR of 13 percent over the next three years and be at FY20’s Rs 9.2 trillion.
The Take
India’s government is also taking important measures to promote the industry and increase its development in the upcoming times. The Ministry of Commerce and Industry has chosen to provide the sector with a one-time Rs 8 million financing to build original facilities and a four-year phase-wise Rs 33.9 million assistance.
The government of India’s future focus is to reduce the logistics price, which currently stands at 14.4 percent of India’s GDP. The goal is to bring it down in the next four years to a point of 10%. This is a very important step that will increase the sector’s competitiveness and be important for its further development. The government has also taken measures on securing the transportation sector with the implementation of the AIS 140 rule.
For the logistics industry in India, strategic investment and public initiatives to support the sector will be essential in the future. If the cards are played right, the industry can generate enormous numbers of employment for the peasants and play the main role in driving the high wave economy.
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