Indias logistics sector is poised for accelerated growth, led by GDP

revival, ramp up in transport infrastructure, e-commerce penetration,

impending GST implementation, and other initiatives like Make in
India.
This offers opportunities across the spectrum for companies in
transportation, storage, distribution, and allied services, according to a
report by Motilal Oswal Securities Ltd.
Empirical evidence suggests the Indian logistics industry grows at 1.5-2
times the GDP growth. Moreover, infrastructural bottlenecks that have
stifled sectors growth and promoted inefficiency are being addressed
by the government.
Building of dedicated rail freight corridors will promote efficient
haulage of containerised cargo by rail. One key advantage of the
dedicated freight corridor is that freight trains could be run on time
tables similar to passenger trains, and the frequency can be
theoretically increased to one train in 10 minutes. This will reduce time
for goods transportation between Mumbai and Delhi to 18 hours from
60 hours now.

Also, setting up of various industrial corridors along the dedicated

freight route will metamorphose the warehousing business from small
warehouses spread across the country to large, global-size warehouses
concentrated in a few hubs.
The proposed new goods and services tax (GST) regime and ecommerce will alter the landscape in warehousing, supply chain
management and third party logistics business. GST implementation
will be a game-changing event for businesses and particularly for
organised logistics players.
The report says logistics requirement for e-commerce will grow as
exponentially as e-commerce.
Indian logistics sector is estimated to have grown at a healthy 15% in
the last five years. However, growth in sub-sectors varies, with the
lowest being in basic trucking operations and highest in supply chain
and e-tailing logistics. Some studies estimate the share of Indias
logistics spend in GDP at 13% (versus 7-8% in developed countries),
implying overall size of $180-220 bn (direct costs +wastages from
inefficiencies). A comparison with other countries shows inefficiencies
are high in the Indian logistics sector.
Infrastructural bottlenecks across modes (rail, road, waterways) have
stifled the sectors growth. Capacity constraints and inefficiencies can
be noted from the high transit time in rail as key train routes operate
at >110% utilisation, thus leading to an average speed of 25 km per
hour. The road sector is fraught with inadequate and low-quality
highway availability, thereby limiting the trucks size and impacting
economies of operation.

Despite being an economical mode of transport, railways has lost

market share in freight movement to roads in the last few decades due
to capacity constraints. Compared to other countries, Indias rail share
in goods transport is 31%, which has come down from 60% in 1980s
and 48% in 1990s.
Another key constraint is administrative delays. Despite being a
relatively low-cost country, logistics cost in India is higher due to
administrative delays led by paper workleading to huge inventory
investments and wastageand a complex tax structure.
Also, low penetration of new technology in the supply chain process is
resulting in damage of goods. India has the least warehouse capacity
with modern facilities, and given the fragmented industry state (large
share with unorganised players), investment in IT infrastructure is
almost absent at required scale.
Logistics encompasses a wide array of services like transportation (air,
surface, internal waterways, sea), storage (warehousing, logistics
parks, container depots, cold chains) distribution (courier service, e-tail
deliveries),and integrated/allied services (freight forwarding, 3PL) and
investment in logistics boosts growth in its upstream and downstream
economic activities, says the report.
First Published on March 18, 2015 12:05 am