SECTORS AT THE INDIA PAVILION

Logistics

ON THE FAST LANE
India Has The World’s 2nd Largest Road Network.

The Indian logistics sector is currently valued at US$ 215 billion.

Transport and Logistics is a US$ 215 billion industry in India.

With 22 million workers, the transport and logistics industry is estimated to become the largest employment provider by 2022.

The Indian warehousing and logistics market has received around $3.4 billion of institutional capital over the last five years.

The Indian logistics market is expected to grow at a CAGR of 10.7% during 2020-2024.

India has the world’s 2nd largest road network with 5.5 million km comprising national & state highways and urban & rural roads.

During April-September 2020, 3951 km of road was constructed.

Derivatively, a target of 11,000 km has been set for the 2021-2022 fiscal year.

The Government of India (GoI) is planning to expand the national highway network to over 200,000 km.

The Bharatmala Pariyojana aims to provide 4-lane connectivity to 550 districts, increase average vehicular speed by 20-25% and reduce the supply chain costs by 5-6%.

The government has forecasted an investment of $350 bn towards road infrastructure in the North-East region of India during 2020-2025.

The World Bank has sanctioned US$ 152 million for Meghalaya Integrated Transport Project.

Growth in the industry could lead to a 10% reduction in indirect cost resulting in a 5 to 8% growth in exports.

The Indian warehousing and logistics market has received around $3.4 billion of institutional capital over the last five years. In 2017, the Indian warehousing industry was worth US$ 7.77 billion growing at a rate of 10-12% every year. Of the total private equity investments into real estate, around 26% account for investments into the warehousing sector.

The logistics industry holds unprecedented importance as it connects various markets, suppliers and customers dotted across the country, and is an integral part of the national GDP value chain. The consumer demand for value-added services provides opportunities for industry players to elevate from operation to strategy.

There is an immediate need for the highly fragmented Indian logistics market to get more organized and reduce logistics cost to 10% of the GDP from the current 14%, by 2022. The Indian logistics market is expected to grow at a CAGR of 10.7 percent during 2020-2024.

Infrastructure readiness and technology are expected to be the key drivers of growth for the Indian logistics industry. India has the world’s 2nd largest road network with 5.5 million km comprising national & state highways and urban & rural roads. Additionally, it also has a well-developed framework for Public-Private Partnerships (PPP) in the highway sector. During April to September 2020, 3951 km of road was constructed. Derivatively, a target of 11,000 km has been set for the 2021-2022 fiscal year.

Multi-Modal Logistics Parks Policy (MMLPs) is expected to lower freight costs, reduce vehicular pollution and congestion and cut warehouse costs to promote domestic and global trade. The National Logistics Portal will serve as a transactional e-marketplace by connecting buyers, logistics service providers and relevant government agencies.

Recognizing the role played by the transport and logistics sector in paving the way for economic growth, the Government of India has charted a definite course of action for the development of the sector:

  • The Government of India (GoI) is planning to expand the national highway network to over 200,000 km. It aims to build 66,100 km of economic corridors, border and coastal roads, and expressways to boost the national highway network under the Bharatmala Pariyojana, with an aim to provide 4-lane connectivity to 550 districts, increase average vehicular speed by 20-25% and reduce the supply chain costs by 5-6%.
  • The Government of India is preparing an Integrated Transport and Logistics Policy that aims to transform centralized strategic networks for shipment distribution. It plans to set up 50 economic corridors, 35 multimodal logistics parks (MMLP) at 15 locations and ten intermodal stations.
  • The National Highways Authority of India (NHAI) has gone ‘Fully Digital’, with the launch of unique cloud based and Artificial Intelligence powered Big Data Analytics platforms.
  • NHAI is looking to monetize around 7,500 km of road projects worth US$ 41.66 billion through SPV and toll operate-transfer (TOT) models. A second InvIT worth US$ 833 million is also under planning.
  • The government has forecasted an investment of $350 bn towards road infrastructure in the North-East region of India during 2020-2025.

Considering the size and scale of projects scheduled to be executed under the sector, it becomes imperative to secure sizable investments. Some significant developments in this regard include:


  • 100% FDI has been allowed by the Indian government under the automatic route.
  • The World Bank has sanctioned US$ 152 million for Meghalaya Integrated Transport Project.
  • A Logistics Data Bank Project has been commissioned to track containers on a ‘near-real-time’ basis as part of the India-Japan bilateral cooperation. Growth in the industry could lead to a 10 % reduction in indirect cost resulting in a 5 to 8 % growth in exports.

The ecommerce boom acted as a catalyst for the logistics sector in the country. The likes of Delhivery, Rivigo, and BlackBuck have set the pace in the Indian market. There lies a wide scope for innovation to serve customers in a more efficient manner. This seems to be the mantra of new-age logistics startups in India.

The Indian Transport and Logistics Sector, with its strong institutional support, ample scope for expansion and infrastructure upgradation is on its track to ferry diverse sectors of the Indian economy to its destination of desired economic outcomes.