A major trend in the Indian logistics and supply chain sector is the strong impetus and focus on developing infrastructure for transport, so much so that it can offer valuable and customised support to key industries like pharmaceuticals, textiles and other manufacturing sectors earmarked by the government to drive the robust growth of the Indian economy. From being the backbone of a developing economy, the logistics and supply chain sector is now a frontrunner and major driver of not just national and international trade but also the lifeline of smaller business, start-ups and entrepreneurs.
Upamanyu Borah
The focus of the Indian government over the past few years has been on accelerated growth through improved bilateral trade and foreign investment policies. India has garnered tremendous goodwill and become a global brand for trade development, thanks to the proactive government initiatives.
As per research reports, the estimated size of the Indian logistics market is pegged at US$215 billion and is growing at a CAGR of 10.5% and only 10-15 per cent of the overall market is owned by organised players. Out of the aforesaid amount, the online vertical is estimated between US$20 and US$30 billion by 2025.
The growth in the sector is mostly being driven by the rise of international business in India which is itself the result of the improved bilateral trade.
With the government striking trade deals with countries like the US, Australia, Japan and top European nations, there’s little doubt that the Indian logistics and supply chain management sector is on the path of becoming one of the most sought after sectors in the Indian economy.
As per a recent report by Arthur D Little India in collaboration with the CII, India’s Logistics and supply chain costs currently amount to a staggering US$400 billion, up to 14% of the GDP, compared to the global average of 8%, raising a competitiveness gap of approximately US$180 billion.
“Logistics will witness an uptick post-COVID as the focus will progressively be on the entire supply chain of doorstep delivery. This means specific thrust on warehousing and packing/packaging to enable the smooth flow of goods. Warehousing will see a thrust mainly due to the higher farm produce to the market. The development of eNAM bodes well for building more warehousing space as farmers move to the market,” Madan Sabnavis, Chief Economist at CARE Ratings had previously revealed.
“Growth in this industry is dependent on several factors. Firstly, higher growth in GDP which goes with a recovery entails higher movement of goods across the country. Secondly, warehousing today is an integral part of the e-commerce industry which is booming. Furthermore, the growth of the food processing industry in particular will lead to growth in private demand for warehousing space. Above all, growing exports will increase demand for efficient logistics services to cut costs and become more competitive,” Sabnavis further added.
“As we celebrated 75 years of India’s independence, the announcement by the honourable PM about investing Rs 100 cr for the ‘Gati Shakti’ master plan to accelerate development of transportation and logistics infrastructure in the country, that in turn is set to help faster ‘reach to market’ for Indian manufacturing sector that is gearing up to expand, thanks to the ‘Atmanirbhar Bharat’ initiative,” said Hector Patel, Executive Director and Board Member, Jeena & Company.
“In addition to this, the National Logistics Policy introduced by the government is further designed to promote seamless movement of goods through focus on digitisation, process re-engineering, multimodal transport, EXIM trade, etc. which will further provide an impetus to trade and enhance the Logistics Performance Index for the country.”
Patel said that in the backdrop of the global pandemic, the Indian logistics, and supply chain sector evolved from being a support sector to a high impact sector, growing at a rate of 10.7% CAGR. “While the pandemic and the massive vaccination drive have already led the sector to evolve rapidly so as to meet the numerous challenges, it is now ready to take a giant leap in the coming years.”
Manufacturing in India holds the potential to contribute up to 25% to 30% of the GDP by 2025 which will drive the growth of the warehousing segment in India. The logistics market in India is forecasted to grow at a CAGR of 10.5% between 2019 and 2025. E-commerce is another major segment which is expected to support growth of the logistics industry during the forecast period. Increasing investments and trade point towards a healthy outlook for the Indian freight sector. Port capacity is expected to grow at a CAGR of 5% to 6% by 2022, thereby, adding a capacity of 275 to 325 million tonnes. Indian Railways aims to increase its freight traffic from 1.1 billion tonnes in 2017 to 3.3 billion tonnes in 2030. Freight traffic on airports in India has the potential to reach 17 million tonnes by FY 2040.
Practically, the factors that have contributed towards India leveraging its growth potential to achieve fruitful bilateral trade, increasing its global footprint, and thrive for an efficient logistics sector to achieve its growth target are as below:
Unlocking export opportunities
As numerous industries enter and set their manufacturing plants in India, it is a noteworthy fact that Indians no longer have to go out of their way and increase any existing trade deficit. India’s overall exports (Merchandise and Services combined) in April-August 2021* are estimated to be US$256.17 billion, exhibiting a positive growth of 44.04 per cent over the same period last year and a positive growth of 15.79 per cent over April-August 2019.
Stronger open trade policies
India is now one of the most powerful players in the global economic landscape with the logistics and supply chain sector as its backbone. The improved bilateral trade and the opened gateway to the Indian economy through globalisation and liberalisation is providing all the needed opportunities. New and improved trade policies have also helped achieve bilateral trade and increase international business. Foreign trade policies such as the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS) have positively complemented the logistics and supply chain management and enhanced the manufacturing sector in India. Extra efforts for improved bilateral trade by the Indian government have also resulted in lower tariffs and taxes by different countries.
Growth and innovation of infrastructure
With a major thrust on strengthening the Indian logistic ecosystem, new and improved logistics hubs and warehouses are planned, strategically around important ports. Logistic parks and specialized spaces for warehouses, is proving extremely helpful. According to a report by the National Transport Development Policy Committee., India’s cargo traffic handled by ports is expected to reach 1,695 million metric tonnes by FY2021-22. Additionally, if Drones Policy 2.0 draft is implemented, India will witness droneports and dedicated drone corridors in upcoming times.
New-age technologies steering growth
New age technology has revolutionised the logistics sector by being a key differentiator. The immediate future is all about leveraging the power of AI, IoT, AR and VR to revolutionise supply chain logistics. Another emerging technology which is poised to create a profound impact is Blockchain. Driverless vehicles, wearable devices, warehouse automation is helping achieve operational efficiencies to counter supply chain cost pressures in the industry. According to IDG’s 2021 State of Digital Business Transformation report, improving customer experience and engagement continues to be the top goal fueling digital transformation. Organisations are also increasing their focus on speed-to-market and innovation.
Futuristic Green Logistics initiatives
With India targeting Net Zero emissions across sectors, logistics companies are already on the road to reduce their carbon footprint and at the same time grow rapidly. India is introducing GPS-enabled toll payments to ensure zero wastage of fuel and resultant emissions across hundreds of Toll Plazas. E-commerce companies have committed to delivering 30 per cent of shipments using Electric Vehicles. Modern warehouses and logistics parks are built with solar rooftops and sell carbon-free electricity rather than consuming it. With the integration of timers, thermostats, and gauges for all forms of electricity, gas, heat, and water, energy management systems are being put to use to derive the best practices to use what is needed without excessive waste.
“Sustainability within logistics is expected to be taken up on a larger scale, with digitalisation and automation being prime movers of such operations. Ports and terminals are some of the largest nucleated sources of carbon emission within the logistics ecosystem. The situation is worsened as major ports often find themselves close to densely populated cities, strengthening their need to oversee ‘greener’ operations next year. This could be done by general electrification of terminal cargo handling equipment like cranes and forklifts,” informed Huseni Vohra, Regional Sales Director, Ocean Insights.
“Overall, 2021 would define how global economies break free from the pandemic’s shackles. As the proverbial ‘mid-mile’ of supply chains, the industry will have to rise to the occasion. In many ways, the pandemic served as a wake-up call to logistics, hastening the adoption of technology in an industry mired in archaic operations. Visibility would be a defining theme, with stakeholders across the value chain leading concerted efforts to effect change and eliminate opacity-related inefficiencies. The interest in data intelligence has fostered supply chain connectivity, with several consortiums created within maritime networks—notably bound by Blockchain technology.”
2021 and beyond….
Change is in the air and India’s logistics industry is becoming organised and technology-driven. Currently, India’s logistics sector is valued at US$160 billion and employs over 22 million people directly. It is expected to grow at a CAGR of 10 per cent to US$215 billion by 2022.
India is also in the middle of an infrastructure building boom. The government’s National Highways Development Project aims to expand the country’s current expressway network of 2000 km and plans to add 18,637 km of Greenfield expressways by 2022. The Bharatmala Project is aiming to construct 83,677 km of highways by 2024.
But it is the ‘Digital Transformation’ that is silently underway and will re-define Indian logistics over the next decade. There is now an entire generation of start-ups focussing on solving India-specific logistics issues deploying state-of-the-art technology.
Notably, the falling cost of technology inclusion, such as cloud computing, GPS trackers, IoT sensors now enables even smaller logistics companies to modernise their systems. Even a newly started logistics company can avail itself of world-class technology at a very low monthly cost.
Logistics companies can easily integrate their systems with larger logistics companies or their customers to offer real-time visibility of inventory and shipments. This democratisation of technology of a large swathe of the logistics sector has the potential to leapfrog India’s logistics ahead of many peer economies and even developed economies.
Also, the government has pushed digitisation in a major way through initiatives such as E-Way bills, FASTag, E-Invoicing, GPS-based toll, etc.
“As per The India Transport Management System Market Report 2021, transport management system (TMS) market in India is estimated to register double-digit CAGR from 2019 to 2028. One of the factors that is accelerating this change is evolving consumer preferences and online shopping. It is quite possible that these habits are likely to stay in the post-COVID world as well, which means that the logistics and supply chain industry of the future will need to focus on optimisation of technology and automation for safe and efficient movement of goods. This also means that the supply chain of tomorrow will be leaner, faster and most importantly, self-orchestrated,” explained Sukrit Sondhi, VP of Product Engineering at Fulcrum Digital.
Digital twins, Sondhi says, are possibly one of the most exciting logistics technology trends to keep an eye on in 2021. “This is drastically changing how the sector works: Now, physical and digital worlds can be melded into one, thus allowing, for the first time, to engage with the digital model of a physical object or part just like we would with their physical counterparts.”
With above, the National Logistics Policy that is expected soon to be released by the Government of India aims to promote seamless movement of goods across the country. It will focus on several areas such as process re-engineering, digitisation, focus on multimodal transport, EXIM trade, etc. and will look at improving logistics in core sectors. It will address many issues in a seamless manner. Effective implementation of the policy would help provide an impetus to trade, enhance export competitiveness, and improve India’s ranking in the Logistics Performance Index.
With opportunities galore and a business environment filled with hope, there’s no looking back for our country and the Logistics sector in 2021!
A major trend in the Indian logistics and supply chain sector is the strong impetus and focus on developing infrastructure for transport, so much so that it can offer valuable and customised support to key industries like pharmaceuticals, textiles and other manufacturing sectors earmarked by the government to drive the robust growth of the Indian economy. From being the backbone of a developing economy, the logistics and supply chain sector is now a frontrunner and major driver of not just national and international trade but also the lifeline of smaller business, start-ups and entrepreneurs.
Upamanyu Borah
The focus of the Indian government over the past few years has been on accelerated growth through improved bilateral trade and foreign investment policies. India has garnered tremendous goodwill and become a global brand for trade development, thanks to the proactive government initiatives.
As per research reports, the estimated size of the Indian logistics market is pegged at US$215 billion and is growing at a CAGR of 10.5% and only 10-15 per cent of the overall market is owned by organised players. Out of the aforesaid amount, the online vertical is estimated between US$20 and US$30 billion by 2025.
The growth in the sector is mostly being driven by the rise of international business in India which is itself the result of the improved bilateral trade.
With the government striking trade deals with countries like the US, Australia, Japan and top European nations, there’s little doubt that the Indian logistics and supply chain management sector is on the path of becoming one of the most sought after sectors in the Indian economy.
As per a recent report by Arthur D Little India in collaboration with the CII, India’s Logistics and supply chain costs currently amount to a staggering US$400 billion, up to 14% of the GDP, compared to the global average of 8%, raising a competitiveness gap of approximately US$180 billion.
“Logistics will witness an uptick post-COVID as the focus will progressively be on the entire supply chain of doorstep delivery. This means specific thrust on warehousing and packing/packaging to enable the smooth flow of goods. Warehousing will see a thrust mainly due to the higher farm produce to the market. The development of eNAM bodes well for building more warehousing space as farmers move to the market,” Madan Sabnavis, Chief Economist at CARE Ratings had previously revealed.
“Growth in this industry is dependent on several factors. Firstly, higher growth in GDP which goes with a recovery entails higher movement of goods across the country. Secondly, warehousing today is an integral part of the e-commerce industry which is booming. Furthermore, the growth of the food processing industry in particular will lead to growth in private demand for warehousing space. Above all, growing exports will increase demand for efficient logistics services to cut costs and become more competitive,” Sabnavis further added.
“As we celebrated 75 years of India’s independence, the announcement by the honourable PM about investing Rs 100 cr for the ‘Gati Shakti’ master plan to accelerate development of transportation and logistics infrastructure in the country, that in turn is set to help faster ‘reach to market’ for Indian manufacturing sector that is gearing up to expand, thanks to the ‘Atmanirbhar Bharat’ initiative,” said Hector Patel, Executive Director and Board Member, Jeena & Company.
“In addition to this, the National Logistics Policy introduced by the government is further designed to promote seamless movement of goods through focus on digitisation, process re-engineering, multimodal transport, EXIM trade, etc. which will further provide an impetus to trade and enhance the Logistics Performance Index for the country.”
Patel said that in the backdrop of the global pandemic, the Indian logistics, and supply chain sector evolved from being a support sector to a high impact sector, growing at a rate of 10.7% CAGR. “While the pandemic and the massive vaccination drive have already led the sector to evolve rapidly so as to meet the numerous challenges, it is now ready to take a giant leap in the coming years.”
Manufacturing in India holds the potential to contribute up to 25% to 30% of the GDP by 2025 which will drive the growth of the warehousing segment in India. The logistics market in India is forecasted to grow at a CAGR of 10.5% between 2019 and 2025. E-commerce is another major segment which is expected to support growth of the logistics industry during the forecast period. Increasing investments and trade point towards a healthy outlook for the Indian freight sector. Port capacity is expected to grow at a CAGR of 5% to 6% by 2022, thereby, adding a capacity of 275 to 325 million tonnes. Indian Railways aims to increase its freight traffic from 1.1 billion tonnes in 2017 to 3.3 billion tonnes in 2030. Freight traffic on airports in India has the potential to reach 17 million tonnes by FY 2040.
Practically, the factors that have contributed towards India leveraging its growth potential to achieve fruitful bilateral trade, increasing its global footprint, and thrive for an efficient logistics sector to achieve its growth target are as below:
Unlocking export opportunities
As numerous industries enter and set their manufacturing plants in India, it is a noteworthy fact that Indians no longer have to go out of their way and increase any existing trade deficit. India’s overall exports (Merchandise and Services combined) in April-August 2021* are estimated to be US$256.17 billion, exhibiting a positive growth of 44.04 per cent over the same period last year and a positive growth of 15.79 per cent over April-August 2019.
Stronger open trade policies
India is now one of the most powerful players in the global economic landscape with the logistics and supply chain sector as its backbone. The improved bilateral trade and the opened gateway to the Indian economy through globalisation and liberalisation is providing all the needed opportunities. New and improved trade policies have also helped achieve bilateral trade and increase international business. Foreign trade policies such as the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS) have positively complemented the logistics and supply chain management and enhanced the manufacturing sector in India. Extra efforts for improved bilateral trade by the Indian government have also resulted in lower tariffs and taxes by different countries.
Growth and innovation of infrastructure
With a major thrust on strengthening the Indian logistic ecosystem, new and improved logistics hubs and warehouses are planned, strategically around important ports. Logistic parks and specialized spaces for warehouses, is proving extremely helpful. According to a report by the National Transport Development Policy Committee., India’s cargo traffic handled by ports is expected to reach 1,695 million metric tonnes by FY2021-22. Additionally, if Drones Policy 2.0 draft is implemented, India will witness droneports and dedicated drone corridors in upcoming times.
New-age technologies steering growth
New age technology has revolutionised the logistics sector by being a key differentiator. The immediate future is all about leveraging the power of AI, IoT, AR and VR to revolutionise supply chain logistics. Another emerging technology which is poised to create a profound impact is Blockchain. Driverless vehicles, wearable devices, warehouse automation is helping achieve operational efficiencies to counter supply chain cost pressures in the industry. According to IDG’s 2021 State of Digital Business Transformation report, improving customer experience and engagement continues to be the top goal fueling digital transformation. Organisations are also increasing their focus on speed-to-market and innovation.
Futuristic Green Logistics initiatives
With India targeting Net Zero emissions across sectors, logistics companies are already on the road to reduce their carbon footprint and at the same time grow rapidly. India is introducing GPS-enabled toll payments to ensure zero wastage of fuel and resultant emissions across hundreds of Toll Plazas. E-commerce companies have committed to delivering 30 per cent of shipments using Electric Vehicles. Modern warehouses and logistics parks are built with solar rooftops and sell carbon-free electricity rather than consuming it. With the integration of timers, thermostats, and gauges for all forms of electricity, gas, heat, and water, energy management systems are being put to use to derive the best practices to use what is needed without excessive waste.
“Sustainability within logistics is expected to be taken up on a larger scale, with digitalisation and automation being prime movers of such operations. Ports and terminals are some of the largest nucleated sources of carbon emission within the logistics ecosystem. The situation is worsened as major ports often find themselves close to densely populated cities, strengthening their need to oversee ‘greener’ operations next year. This could be done by general electrification of terminal cargo handling equipment like cranes and forklifts,” informed Huseni Vohra, Regional Sales Director, Ocean Insights.
“Overall, 2021 would define how global economies break free from the pandemic’s shackles. As the proverbial ‘mid-mile’ of supply chains, the industry will have to rise to the occasion. In many ways, the pandemic served as a wake-up call to logistics, hastening the adoption of technology in an industry mired in archaic operations. Visibility would be a defining theme, with stakeholders across the value chain leading concerted efforts to effect change and eliminate opacity-related inefficiencies. The interest in data intelligence has fostered supply chain connectivity, with several consortiums created within maritime networks—notably bound by Blockchain technology.”
2021 and beyond….
Change is in the air and India’s logistics industry is becoming organised and technology-driven. Currently, India’s logistics sector is valued at US$160 billion and employs over 22 million people directly. It is expected to grow at a CAGR of 10 per cent to US$215 billion by 2022.
India is also in the middle of an infrastructure building boom. The government’s National Highways Development Project aims to expand the country’s current expressway network of 2000 km and plans to add 18,637 km of Greenfield expressways by 2022. The Bharatmala Project is aiming to construct 83,677 km of highways by 2024.
But it is the ‘Digital Transformation’ that is silently underway and will re-define Indian logistics over the next decade. There is now an entire generation of start-ups focussing on solving India-specific logistics issues deploying state-of-the-art technology.
Notably, the falling cost of technology inclusion, such as cloud computing, GPS trackers, IoT sensors now enables even smaller logistics companies to modernise their systems. Even a newly started logistics company can avail itself of world-class technology at a very low monthly cost.
Logistics companies can easily integrate their systems with larger logistics companies or their customers to offer real-time visibility of inventory and shipments. This democratisation of technology of a large swathe of the logistics sector has the potential to leapfrog India’s logistics ahead of many peer economies and even developed economies.
Also, the government has pushed digitisation in a major way through initiatives such as E-Way bills, FASTag, E-Invoicing, GPS-based toll, etc.
“As per The India Transport Management System Market Report 2021, transport management system (TMS) market in India is estimated to register double-digit CAGR from 2019 to 2028. One of the factors that is accelerating this change is evolving consumer preferences and online shopping. It is quite possible that these habits are likely to stay in the post-COVID world as well, which means that the logistics and supply chain industry of the future will need to focus on optimisation of technology and automation for safe and efficient movement of goods. This also means that the supply chain of tomorrow will be leaner, faster and most importantly, self-orchestrated,” explained Sukrit Sondhi, VP of Product Engineering at Fulcrum Digital.
Digital twins, Sondhi says, are possibly one of the most exciting logistics technology trends to keep an eye on in 2021. “This is drastically changing how the sector works: Now, physical and digital worlds can be melded into one, thus allowing, for the first time, to engage with the digital model of a physical object or part just like we would with their physical counterparts.”
With above, the National Logistics Policy that is expected soon to be released by the Government of India aims to promote seamless movement of goods across the country. It will focus on several areas such as process re-engineering, digitisation, focus on multimodal transport, EXIM trade, etc. and will look at improving logistics in core sectors. It will address many issues in a seamless manner. Effective implementation of the policy would help provide an impetus to trade, enhance export competitiveness, and improve India’s ranking in the Logistics Performance Index.
With opportunities galore and a business environment filled with hope, there’s no looking back for our country and the Logistics sector in 2021!
