The Indian logistics sector is witnessing significant growth and transformation. India’s rank in the World Bank’s Global Logistics Performance Index improved to 38th in 2023, with a goal to break into the top 25 by 2030. The industry is expected to grow at a CAGR of 11%, reaching $468 billion by FY2027. This sector is a key employment generator, currently providing livelihoods to over 22 million people, with projections to add 10 million more jobs by 2027.
The logistics industry in India faces both opportunities and challenges. Roads dominate logistics transportation with over 60% share, and the railway freight loading grew at a 5% CAGR from FY2018 to FY2024. The air cargo industry also saw robust growth, recording a 23% CAGR from FY2021 to FY2023. However, the sector is challenged by low infrastructure spending (3.2% of GDP) and high logistics costs (13-14% of GDP).
Digitalization and technology adoption, such as RFID, GPS, IoT, and AI, are enhancing operational efficiency. The e-commerce boom and international trade growth are driving the demand for more efficient logistics solutions. The government aims to reduce logistics costs to 8% of GDP, aligning with global standards.
The road logistics sector is highly unorganized, with small players dominating the market. Indian Railways has made strides with its Dedicated Freight Corridor (DFC), which is expected to reduce logistics costs further. In air cargo, the sector is concentrated in seven major joint venture airports, with key players like Indigo, Blue Dart, and Air India leading the domestic market.
The logistics sector’s expansion is also reflected in the banking sector, with outstanding bank credit to road transporters and aviation companies showing significant growth. However, credit to shipping companies has declined, likely due to global supply chain challenges.
Overall, the Indian logistics sector is on a strong growth trajectory, with increased investments, technological advancements, and government support driving its development.