Logistics Sector in India

Context: Presently, the logistics sector in India is valued at $250 billion and contributes to 14% to India’s GDP. Given its crucial role in supply chains, experts remain bullish on the future growth prospects of the sector. 

Relevance of the Topic: Mains: Logistics Sector- Present scenario, Initiatives, Way Forward

Present Scenario of Logistics Sector in India

• Higher logistics cost in India (12-14% of GDP), compared to 8-10% global benchmark.
• Logistics cost slid 0.8-0.9 percentage points of GDP between FY14-22.
• India is elevated to the 38^th rank (among 139 nations) in the World Bank's Logistics Performance Index Report, 2023.
• The logistics sector demonstrated resilience as it accelerated transition from unorganised to a structured industry.

Initiatives to boost the Logistics Sector in India

• National Logistics Policy, 2022:
  • Aim: achieve ‘quick last-mile delivery', end transport-related challenges.
  • Logistics costs to be cut by half to be near global benchmarks by 2030.
  • India aims to be among the top 10 in the Logistics Performance Index by 2030.
• PM Gati Shakti National Master Plan:
  • Essentially, a digital platform that brings 16 ministries together for integrated planning and coordinated implementation of infrastructure connectivity projects.
• Unified Logistics Interface Platform (ULIP):
  • Aim: to collapse all logistics and transport sector digital services into a single portal.
  • ULIP platform enables the industry players to get secure access to information related to logistics and resources available with various Ministries.
• Logistics Data Bank:
  • It serves as a single-window container logistics visualization system, providing comprehensive tracking using container numbers. 
  • This system tracks containers between ports and their hinterlands, including Inland Container Depots (ICDs), Container Freight Stations (CFSs), port-associated parking plazas, toll plazas, railway stations, industrial corridors, SEZs, and empty yards, etc. during EXIM and domestic journeys.
• National Logistics Portal- Marine (NLP-Marine):
  • NLP Marine is a one-stop platform aimed at connecting all the stakeholders of the logistics community using IT.
  • The activities of NLP Marine are categorized into four distinct verticals:
    • Carrier 
    • Cargo 
    • Banking and Finance 
    • Regulatory Bodies and Participating Government Agencies (PGAs). 

Role of GST in Logistics Sector

• GST has played a crucial role in reducing logistics cost.
• ‘One Nation One Tax’ regime has cut waiting time of trucks at inter-state borders, significantly reducing travel time by 30%.
• This has reduced the logistics cost and increased the average distance covered by trucks. 

Further Scope for Logistics Development in India

• Deeper digital adoption and intensified focus on risk management has resulted in transformative changes in the Indian logistics sector in 2024.
• “China-plus-one-strategy” adopted by various multinational companies further reaffirms India’s critical position in global supply chains.
• Supporting policies like giving Infrastructure status to ‘Warehousing’ and expanded FDIs accelerate the development of multi-client warehousing facilities.
• The 11.1% rise in capital expenditure for infrastructure signals significant growth opportunities in the sector.

Way Forward

• Need for skilling
  • To fully unlock the potential of the sector, enhancing workforce skills is crucial.
• Capitalise on global trade opportunities
  • Policies strengthening the growth of e-Commerce, demand for faster delivery, export expansion driven by PLI schemes can accelerate goods movement.
• Streamlining Government initiatives
  • Initiatives like UDAN (promoting regional air connectivity) and NLP, will cut logistics cost by 4-5%, enhancing competition in global markets.
• Multi-modal connectivity
  • Strengthen Maritime connectivity projects to hasten transformation from land-based to coastal transportation.
  • Implement India Ports Bill for the development of the ports sector and increasing its share in logistics.

Logistics has a crucial role in supply chains — whether road, rail, air, waterways or warehouses. India’s ambition of becoming a $5 trillion economy by 2027, strongly depends on the development of the logistics sector. Government interventions like cutting costs and focusing on reskilling and upskilling can be a game-changer.