Transforming India’s Logistics Sector: Cost Reduction, Skill Development, and Seamless Goods Movement
The logistics sector in India is experiencing a significant transformation due to various reform initiatives and policy changes, making it a thriving industry. Key reforms, such as the implementation of Goods and Services Tax (GST), the introduction of E-Way bills, and the recognition of the sector’s infrastructure status, have played a pivotal role in this transformation.
- Indian logistics industry employs over 22 million people.
- It has experienced a compound annual growth rate (CAGR) of 7.8% in the past five years.
- According to the World Bank’s 2016 Logistics Performance Index, India’s overall logistics performance improved significantly, moving up from 54th rank in 2014 to 35th rank in 2016.
- India has shown improvement in all six components of the logistics performance index.
- India ranked 44th in World Bank Logistics Performance Index 2018.
- Gujarat has topped the Logistics Ease Across Different States (LEADS) 2021 index
Why India Needs robust Logistics Sector:
- High Logistics Cost: The logistics cost in India is comparatively high at around 13-14% of the GDP, whereas developed economies have logistics costs around 8%. To reduce costs and improve competitiveness, India needs an efficient and cost-effective logistics sector.
- Fragmented and Complex Sector: The logistics sector in India is highly defragmented and complex. This fragmentation leads to inefficiencies, delays, and increased costs. Developing a robust logistics sector would streamline operations, reduce complexities, and improve overall efficiency.
- Employment Generation: The logistics sector in India is a significant employment generator, providing jobs to over 22 million people. Strengthening the logistics sector would not only support existing jobs but also create new employment opportunities, contributing to economic growth and development.
- Growth Potential: The logistics sector in India is expected to grow at a rate of 10.5% over the next five years. Investing in a robust logistics infrastructure and improving logistics efficiency would support this growth trajectory, facilitating trade and economic expansion.
- Backbone of International Trade: Logistics plays a crucial role in India’s international trade. A robust logistics sector would enable efficient movement of goods, reduce trade barriers, and enhance export competitiveness. It would also facilitate the diversification of India’s export basket, opening new avenues for trade with different products and countries.
Overall, developing a robust logistics sector in India is essential to reduce costs, improve efficiency, drive economic growth, generate employment opportunities, and strengthen the country’s international trade capabilities.
Limitation:
- Limited use of automation in logistics operations.
- Many small and unorganized players dominate the sector.
- Logistics costs in India are much higher compared to developed countries.
- High costs affect competitiveness in both domestic and global markets.
- Inadequate infrastructure for material handling and fragmented warehousing.
- Multiple regulatory bodies and policies add complexity to the sector.
- Goods face difficulties in smooth movement across different transportation modes.
- Limited adoption of modern technology for efficient logistics operations.
WayForward:
- Cost Reduction: India should strive to reduce the logistics costs from the current level of 13-14% to 10% of the GDP within the next five years. This can be achieved through efficiency improvements, process optimization, and infrastructure development.
- Skill Development and Employment Generation: It is crucial to focus on skill development initiatives to equip the youth with the necessary capabilities for the logistics sector. By creating employment opportunities and promoting vocational training, India can harness the potential of its young workforce and meet the growing demand for skilled logistics professionals.
- Seamless Movement of Goods: Promoting the seamless movement of goods is essential for enhancing the competitiveness of the logistics industry nationwide. This can be achieved by addressing regulatory bottlenecks, streamlining documentation processes, and reducing transit times.
- Embrace Digitization: India should focus on process re-engineering and digitization to improve operational efficiency and transparency within the logistics sector. Leveraging technology can help automate processes, enhance visibility, and enable better coordination among stakeholders.
- Multi-Modal Transport: Developing an integrated multi-modal transport system is crucial for efficient logistics operations. By enhancing connectivity and infrastructure across various modes of transportation such as road, rail, air, and waterways, India can facilitate smoother movement of goods and improve overall logistics performance.
By aiming for these goals, India can enhance its logistics sector, reduce costs, create employment opportunities, improve competitiveness, and strengthen its position in domestic and international trade.
