Ranjan Sinha, CEO-Logistics, Supply Chain & Port Operations
The logistics sector in the country is largely unorganized and fragmented, resulting in high logistics cost at 14-15% of the GDP, compared to 7-8% in developed nations. There is also a high degree of wastage in the supply chain. For instance, 16% of India’s agricultural production is estimated to be wasted at different stages of the supply chain.
To address these challenges, the government introduced the National Logistics Policy (NLP) in September last year.
Through the initiatives of the National Logistics Policy, the government intends to raise India’s global ranking in the Logistics Performance Index to 25, from 44 in 2018, and bring down logistics cost to 8% of GDP by 2030.
India’s logistics sector is poised to grow at a CAGR of 5% from 2022-25, generating market revenue of over USD 500 billion by 2025. This is the time when India is aiming to become a USD 5 trillion economy. But to achieve this ambitious target, it is important that the country’s trade and exports improve significantly.
Picture courtesy: barrett-ward-unsplashThe government has taken various initiatives to boost trade and announced several policies to improve infrastructure and reduce logistics cost to make Indian products globally competitive. While all the announcements are encouraging, there is still a lack of clarity on when and how the policy will be implemented and how the stakeholders will benefit from it.
As per a study, freight movement through rail is only 18 per cent whereas road still occupies 71 per cent of the total freight transported, which means that logistics costs are being paid at 50% extra. Apart from increased freight, the logistics sector also faces challenges of inadequate infrastructure and inefficient modes of transport.
Thus, there is a need to have a proper mix of railway and road freight movement. We need to develop more railway freight corridors, which could give more than 50 per cent relief in terms of costing. So, the right mix has to be 20-25 per cent through road transport, 50 per cent from railways, and around 20-25 per cent through waterways. The government is giving a lot of importance to coastal shipping and waterways. Besides, it is also eco-friendly. We have to switch on to the green mode of transportation because of the global requirements; hence, we need to focus on logistics model mix.
The policy will be supported by the PM’s Gatishakti National Master Plan to develop the requisite infrastructure and digital systems for the sector's growth, resulting in faster and more efficient movement of goods and reduced delays and inefficiencies.
NLP has proposed a single window portal to co-ordinate the services provided for warehousing, shipping, transportation,and other government agencies to speed up the approvals and process.
The benefits of Artificial Intelligence, cloud automation, blockchain, big data and other specialised software will also be availed through NLP portal. An integrated Unified Logistics Interface Platform of NLP will augment the collaboration between supply chain companies customs process automation, maximum usage of multimodal transportation which will help to bring transparency and monitoring of key logistics metrics.
This will also help save money and time and increase productivity. Improved speech recognition software will enable workers to interact directly with the warehouse management system.
Future of India's Logistics
Buoyed by the National Logistics Policy, the outlook for the logistics sector appears positive. Growth in logistics infrastructure is expected to create more job opportunities and further support the economic growth of the country. With GDP growth, logistics will grow with a multiplier effect and play a key role in the manufacturing growth expected under the PLI (Production Linked Incentive) scheme. The supply chain and logistics sector, in the coming year, will become more adaptable and resilient to external economic factors.
As per the trend forecasted by the industry leaders there will be significant growth in logistics sector in India for the following reasons:
- Greater use of new-age technologies such as AI, ML, and automation, to optimize and automate core logistics processes.
- Focus on sustainable operations by reducing the miles travelled per package, eliminating empty miles, optimizing delivery routes for better resource utilization, and lowering shipping costs and trip volumes.
- More investment in electric vehicles followed by automated parcel devices which will act as alternate delivery locations for congested areas and route planning solutions.
- Given the growth in e-commerce and proliferation of retail channels, last-mile delivery will drive growth of the logistics industry. The focus will be on making last-mile delivery more intelligent, responsible, and less reliant on human labour.
