Logistics industry in India is gaining momentum at a fast pace with the evolution of infrastructure and technological innovations with the emergence of new types of top logistics companies in India. The Indian logistics industry is defined by its ability to function as an integral service to the customers in helping them ameliorate their overhead costs in the logistics sector in India. Logistics is regarded as a crucial sector of the economy to offer cost-effective solutions for shipment and transportation of goods that supports various other commercial sectors. The logistics market in India comprises shipping, port-services, warehousing, rail, road and air freight, express cargo and other value-added services. The logistics sector in India supports various components of the manufacturing industry in India. Over 50% of the logistical requirements are outsourced by the top logistics companies in India.
Transport is a crucial component of the Indian logistics industry, being about half the size of the Indian logistics industry market size, followed by warehousing and storage, comprising another 25-30% of the total market. The rest of the Indian logistics industry market size constitutes value-added and freight forwarding services. Road transportation with over 50% market share dominates the logistics industry in India, succeeded by the railway’s sector at over 30%, water transport at 7%, and air shipment at 1%. The boom in the e-commerce sector and expansionary policies of the FMCG firms have increased the service geography of the best logistics companies in India. The industry has moved from being just a service provider to provider of end-to-end supply chain solutions to their customers.
Growth Rate of Logistics Industry in India
The Indian freight transportation sector has been forecasted to register a CAGR of more than 13% by the end of 2022 owing to factors such as rising growth of manufacturing, e-commerce, and retail industries. Furthermore, the high rate of development and new solutions for the transport infrastructure is likely to boost the logistics industry in India. The Indian freight transportation sector is likely to surpass $300 billion during the period of 2017 through 2022. The freight by roadways sector in India comprises more than 60% of the total 2.2 million heavy vehicles and 0.5 million light transport vehicles in the total road freight fleet size.
The road freight market is forecasted to garner a healthy CAGR of over 15% in the next five years. The estimated spending on logistics industry in India is over 14% of the country’s GDP compared to less than 8% by most of the developing economies in the world. According to an industry journal by Assocham, India can potentially save over $45 billion if the costs on logistics can be lowered to 9% of the GDP of India, which will result in Indian made goods becoming more competitive in the markets worldwide. The fresh taxation policies and GST will help lower costs of distribution for the top Indian logistics companies in the logistics industry in India. Logistics companies in India have been compelled to established various small facilities across many cities in the past. In the near future, they will be able to set up fewer and bigger facilities based on regional demand and cut down on distribution costs significantly.
Logistics Sector in India Overview and Challenges
The highly integrated framework of logistics and transport is aimed with a goal of increasing the speed of transportation of the freight on highways across the country from the present speed of 20-30 km per hour to around 50 km per hour that will help cut down costs by almost half. The Indian road transport network is the major part of the transport network in India. The logistics sector in India is witnessing a growth of more than 10% every year. Various new policies and initiatives by the Indian government by decongesting the Indian roadways network are likely to augment the growth of the Indian logistics industry on the whole.
In addition, the Indian logistics industry is expected to derive gains from the recovery and revival of the economy in the industrial sector and also foster the growth of the logistics industry in India. The logistics industry in India is finding many other sectors that are investing heavily, such as aviation, FMCG, and metal & minerals. The Indian logistics industry looks well-poised for a bright future with the entry of many foreign companies and their focus on outsourcing their logistical requirements. The Indian logistics sector is likely to continue growing at over a CAGR of 10% for the next few years, thereby aiding the growth of the Indian economy on a large scale.
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