Growth Drivers of the Indian Logistics Sector

Feb 6, 2020

The logistics sector in India has been growing rapidly over the past few years and is considered the sunshine sector by investors in India and from abroad. This growth is fuelled from both the demand, as well as supply side. To comprehend this growth better, we need to look into the following growth drivers: 1. Adoption of Matured Supply Chain Strategy Compared to the developed countries, India’s logistics cost as a percentage of GDP is very high and the main reason is the inefficiencies in the supply chain and the fragmented nature of the industry. Now, Indian companies have started addressing this and working towards adopting more matured supply chain strategies in order to make it lean and more effective. As a consequence of these, logistics is now looked upon as an enabler of business and being fully outsourced to integrated logistics players, who are providing end to end value added solutions, rather than just taking task-oriented activity. This is strengthening the organised players in the system which is in turn aiding the growth of the industry. 2. Boost in Government Policies and Regulations Indian Government has been undertaking many key reform measures like granting Infra status to logistics, unveiling of the goods and services tax (GST), relaxing the FDI regulations, in order to boost the core competency of the industry. GST has been a game changer, bringing in more efficiency in warehousing and transportation. Post GST, logistics cost has come down because of quicker truck turnaround time, consolidation of smaller warehouses to larger warehouses, more multi-axle vehicles carrying increased loads and lower inventory levels in warehouses because of quicker transit times. Also, GST has improved the ease of doing business with digitalization. This has helped many logistics players to scale up quickly and boost the industry. 3. Infrastructural Developments There has been a steady commitment from the government to develop the logistics infrastructure to improve the connectivity across the vast spread geography of our country. This has enabled the logistics players to tap the rural markets in India which has a huge potential. The high-speed dedicated freight corridors will decongest the roadways and aid in reducing the transit times. This not only will promote the industry but also generate employment through the setting up of new industrial parks along the new freight corridors. 4. Latest Technologies Technological adoption is becoming the key differentiator for the logistics players to provide top-notch services to their customers at a very competitive rate. New age technologies such as Artificial Intelligence, Machine Learning, IoT are redesigning the way in which the logistics operations are conducted. Like any other change, this is also taking time, but there has been consistent progress and promising results in improving the productivity and operational efficiencies. With the help of technology, logistics industry will become more efficient, streamlined and we can expect many significant things to happen, thus stimulating the growth of the industry. All these four factors propelling the logistics industry, it is expected to reach $250 billion by 2020. These are exciting times for all the logistics companies, logisticians, supply chain professionals and other players to play a role in supporting the growth and development of this industry.

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