The Indian logistics market, which was valued at Rs 9 trillion in FY23, is expected to expand to Rs 13.4 trillion by FY28, recording a compounded annual growth rate (CAGR) of 8-9%, according to a report by Motilal Oswal. This growth is attributed to structural changes, advancements in technology, and government initiatives aimed at optimising logistics costs and enhancing infrastructure.

The National Logistics Policy, introduced in September 2022, aims to streamline India’s logistics sector by increasing the share of railways in freight movement (currently 18%) through the development of dedicated freight corridors (DFCs), improving road infrastructure, and expanding inland waterways. As of April 2024, 96% of the DFCs have been completed, which is expected to significantly enhance the capacity and efficiency of rail freight, thus increasing its share in the overall modal mix.

Additionally, the government’s focus on port privatisation has resulted in improved infrastructure and operational efficiency, benefitting major operators such as Adani Ports and SEZ (APSEZ) and JSW Infrastructure.

Currently, India’s logistics cost as a percentage of GDP is at 14%, considerably higher than the 8-9% observed in developed economies. This is largely due to an imbalanced modal mix, with roads accounting for 71% of freight movement, while railways and waterways contribute a relatively smaller share. To address these inefficiencies, the government has implemented several initiatives, including the Goods and Services Tax (GST) and heavy investments in road infrastructure, inland waterways, and DFCs. These efforts are anticipated to bring down the logistics cost-to-GDP ratio to 8-9% in the coming years, aligning India with global standards.

The logistics sector is diverse, covering road transport, rail transport, air cargo, multimodal logistics, and industrial warehousing. The domestic express logistics segment is projected to grow at a faster rate, with a 14% CAGR over FY23-28, largely driven by the expansion of e-commerce.

Organised players, who currently dominate 80% of the market, are expected to further strengthen their position, supported by government policies such as the e-way bill and GST. The less-than-truckload (LTL) segment in road transportation is also poised for notable growth, with a projected 10% CAGR, fuelled by the rising demand for smaller and more frequent shipments, eliminating the need for warehouse storage and enabling direct deliveries to retailers. (ET)