The Indian logistics sector is one of the biggest in the world, growing at an average of 10.5% every year and valued at around $215 billion. It has expanded rapidly in recent years because Covid-19 has caused a massive disruption across demand and supply where corporations are relocating their geographic base from susceptible market origins to more credible and economical kernels.
With strong macroeconomic fundamentals, demographic dividend, highly-skilled English-speaking workforce, ease of doing business, cheap labour costs, enormous resource access, and an expanding market of 1.3 billion people, India has an exclusive chance to be a favourable investment destination across the globe.
Moreover, technology is revolutionising warehouses in India, supporting leaner, more agile operations and allowing warehouses to offer faster delivery and error-free orders, all of which are critical to the success of a fulfilment operation. Hence, technology has resulted in the structurization of the industry. Augmented reality, cloud storage, big data analytics, and more are increasing the efficiency of logistics operations in India.
Buoyed by the thrust on manufacturing by government schemes like the Production Linked Incentive (PLI), warehousing companies are expanding to Tier-II cities and Tier-III cities to improve reach, cost-effectiveness and meet last-mile delivery demand from retailers. Tier II and Tier III cities like Rajpura, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur, Kochi/Ernakulam, Indore, Hosur, and Patna absorbed approximately 8.6 million sq. ft. and the market absorption is above 40 mn sq. ft. in 2022.
However, the logistics industry in India is still plagued by inefficiencies that prevent it from reaching its full potential. But why?
Well, India has an insufficient and ill-equipped infrastructure. Despite having the world's second-largest road network, national highways account for less than 2.7 percent of the total network. India's unbalanced logistics model mix raises transportation costs even further. Despite deteriorating transportation infrastructure, India is heavily reliant on its road networks. Its rail and sea networks continue to be underutilised.
Irrespective, the government has already accelerated infrastructure development under the Gati Shakti National Masterplan which is aiming to build 25,000 km more of national highways, 100 new cargo terminals, four logistics parks, eight ropeway projects, and assist in the launch of 400 new Vande Bharat trains over the coming years, along with a favourable regulatory environment, Centre's support through policy and reforms will lead to higher infrastructure spending while increasing overall demand for modern warehousing.
Conclusion
According to reports, it's predicted that India's logistics sector will expand at a compound annual growth rate of more than 10 percent, from $200 billion in early 2020 to at least $320 billion in 2025. The future of the industry is to witness exponential growth in the coming years. The increased participation of both the public and private sectors is crucial for developing logistics, and improving supply chain management. While the potential for improvement and resource use is enormous, initiatives and advancements in the Indian logistics sector indicate an overall commitment to progress. There is no doubt that the potential will be realised and India will emerge as one of the world's major logistical powerhouses in the coming years.