Potential of Indian logistics sector

Potential of Indian logistics sector | Sociology Optional Coaching | Vikash Ranjan Classes | Triumph IAS | UPSC Sociology Optional

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Potential of Indian logistics sector

Relevant for Civil Services Examination

GS Paper-3

(Infrastructure)

Potential of India’s Logistic Sector

Potential of Indian logistics sector

India’s logistics industry has seen significant growth, with a compound annual growth rate (CAGR) of 11% from the fiscal year 2019 to 2024. This upward trend is set to continue, with estimates suggesting the sector could reach a market size of ₹35.3 trillion by the fiscal year 2029. Although current logistics costs are relatively high at 13% of GDP, there is optimism for improvement. With the formalization of the economy and better connectivity, this percentage is expected to decline to the high single digits, indicating greater efficiency in the sector.

As of fiscal year 2021, transportation, particularly roadways, dominates India’s logistics market. However, the sector is on the cusp of transformation. With substantial investments in rail infrastructure, the railways are projected to grow rapidly, potentially altering the logistics modal mix in the country. While these developments are promising, India must continue focusing on innovation, technology adoption, and infrastructure development to enhance the logistics sector’s efficiency, cost-effectiveness, and global competitiveness.

Key Drivers to the Growth of Indian Logistic Sector

  • Government Initiatives and Policy Support: The Indian government’s focus on enhancing logistics through initiatives like the National Logistics Policy (NLP) and PM Gati Shakti has been a key driver of sectoral growth. Launched in September 2022, the NLP aims to reduce logistics costs from 13-14% of GDP to single digits (around 8%, the global average) by 2030. Additionally, the PM Gati Shakti National Master Plan, introduced in October 2021, is focused on developing multimodal connectivity infrastructure across economic zones. By August 2023, over 1,400 layers of data were integrated into the Gati Shakti portal, improving infrastructure planning and execution. These initiatives are expected to significantly boost efficiency and lower logistics costs.
  • E-commerce Boom and Last-Mile Delivery: The rapid expansion of e-commerce has played a critical role in driving growth within India’s logistics sector. E-commerce in India is projected to grow at a CAGR of 27%, reaching USD 163 billion by 2026. This surge has created a greater demand for efficient last-mile delivery services, leading to the rise of specialized logistics companies and investments in technology-driven solutions. For example, the growth of major players like Delhivery highlights the sector’s evolution. The Covid-19 pandemic further accelerated this trend as consumers increasingly turned to online shopping, heightening the need for robust logistics networks.
  • Infrastructure Development: Significant investments in transportation infrastructure have been pivotal to the logistics sector’s growth. The government’s focus on developing highways, railways, ports, and airports has enhanced connectivity and reduced transit times. For instance, the Dedicated Freight Corridor (DFC) project, encompassing both Eastern and Western corridors, is set to transform freight movement. Additionally, the National Infrastructure Pipeline (NIP) for FY 2020-25 allocates ₹111 lakh crore for infrastructure projects, with a substantial portion dedicated to transportation. These developments are expected to improve logistics efficiency and reduce transportation costs.
  • Technology Adoption and Digitalization: Advanced technologies like AI, IoT, blockchain, and data analytics are reshaping India’s logistics landscape. These tools are enhancing operational efficiency, transparency, and real-time tracking capabilities. For example, Rivigo, an Indian logistics startup, leverages AI and big data to optimize delivery routes and reduce travel time. The implementation of e-way bills and FASTag has further streamlined the movement of goods and toll collection processes, spurring investments and innovation in the sector.
  • Rise of Third-Party Logistics (3PL) and Fourth-Party Logistics (4PL): The increasing complexity of supply chains and the growing demand for specialized logistics services have led to the expansion of 3PL and 4PL providers in India. These companies offer end-to-end supply chain solutions, allowing businesses to concentrate on their core functions. The Indian 3PL market is forecast to grow by USD 16.77 billion, at a CAGR of 9.45%, between 2023 and 2028. The trend toward outsourcing logistics operations is expected to drive further growth in this segment.
  • Warehousing and Cold Chain Development: The rising demand for modern warehousing facilities and cold chain infrastructure has been a significant contributor to the logistics sector’s growth. The implementation of GST has led to warehouse consolidation and the establishment of large-scale logistics parks. According to Knight Frank India, the warehousing sector attracted investments worth $743 million in FY2022. The government’s focus on reducing post-harvest losses has also stimulated investment in cold chain infrastructure. By June 30, 2024, the Ministry of Food Processing Industries (MoFPI) had approved 41 Mega Food Parks, 399 Cold Chain projects, 76 Agro-processing Clusters, and 588 Food Processing Units under the Pradhan Mantri Kisan Sampada Yojana (PMKSY). These developments are crucial for improving storage capabilities and reducing spoilage, particularly in agriculture and pharmaceuticals.
  • Growing Export-Import Trade: India’s increasing involvement in global trade is boosting the demand for logistics services. Despite global economic challenges, merchandise imports surged by 16.51% to USD 714.24 billion in 2022-23, while exports grew by 6.03% to USD 447.46 billion. For example, the India-Middle East-Europe Economic Corridor (IMEC) agreement, signed in September 2023, aims to strengthen trade connectivity, which is likely to drive demand for maritime and multimodal logistics services.

Issues in logistic  sector

  • Infrastructure Bottlenecks: Despite substantial investments, infrastructure challenges persist in India’s logistics sector. Poor road conditions, congested ports, and inadequate rail connectivity continue to cause delays and raise costs. For instance, while the average turnaround time at major ports has improved, falling from 127 hours in 2010-11 to 53 hours by 2021-22, issues remain. India ranked 38th out of 139 countries in the World Bank’s Logistics Performance Index 2023, with infrastructure quality as a significant concern.
  • Fragmented and Unorganized Market: The Indian logistics industry remains highly fragmented, with the unorganized sector accounting for over 90% of the market. This fragmentation leads to inefficiencies, lack of standardization, and difficulties in adopting technology and best practices. Moreover, it complicates the implementation of uniform regulations and quality standards across the sector.
  • Skill Gap and Workforce Challenges: A critical skill gap in the logistics industry is hindering growth, particularly in areas like supply chain management, warehouse operations, and technology adoption. Although the sector is expected to grow at a compound annual growth rate of 12%, adding 10 million jobs by 2027, there remains a shortage of trained professionals. Between FY17 and FY23 (as of January 2023), around 1.1 crore individuals were trained under the Pradhan Mantri Kaushal Vikas Yojana 2.0, with 83% certified, yet only 21.4 lakh were placed in jobs.
  • Last-Mile Delivery Challenges: The rapid expansion of e-commerce has exacerbated last-mile delivery issues, especially in urban areas. Inefficient addressing systems and limited parking for delivery vehicles contribute to increased costs and delays. According to the Capgemini Research Institute, last-mile delivery accounts for 41% of total logistics costs. While innovations like drone deliveries are being tested, regulatory obstacles and infrastructure limitations hinder progress in improving last-mile logistics.
  • Environmental Concerns and Sustainability: The logistics sector is under increasing pressure to reduce its environmental footprint, particularly in terms of carbon emissions. The transport sector accounts for approximately 13.5% of India’s carbon emissions. Despite ambitious government targets, such as reducing carbon intensity by 45% by 2030, the logistics industry lags in adopting sustainable practices. For example, as of September 2023, electric vehicles (EVs) represent a small fraction of the commercial vehicle fleet used in logistics. The scarcity of charging infrastructure (with only 6,000 EV charging stations) and the high initial costs of EVs remain major barriers to widespread adoption of green logistics solutions.
  • Multimodal Integration Challenges: Efforts to promote multimodal transportation have been slow to bear fruit. Road transport still accounts for about 60% of freight movement in India, contributing to higher costs and environmental impact. The shift towards more efficient modes, such as railways and inland waterways, has been sluggish. Indian Railways’ share of freight transport has dropped from 85% in 1951 to less than 30% by 2022. Additionally, the Dedicated Freight Corridor (DFC) project has faced delays, further hindering effective multimodal integration and logistics efficiency.
  • Cybersecurity and Data Protection: As the logistics sector becomes increasingly digitized, concerns over cybersecurity and data protection have grown. Many small and medium-sized logistics companies lack adequate cybersecurity measures, exposing them to potential threats and data breaches.

What can be done?

  • Accelerate Infrastructure Development: Expedite the completion of critical infrastructure projects, with a focus on enhancing multimodal connectivity.
  • Streamline Regulatory Processes: Establish a single-window clearance system for logistics-related approvals across all states to reduce regulatory bottlenecks.
  • Promote Technology Adoption: Encourage the integration of advanced technologies like AI, IoT, and blockchain in logistics operations by offering tax incentives and subsidies.
  • Enhance Skill Development: Overhaul logistics education and training programs to better match the evolving needs of the industry.
  • Improve Warehousing and Cold Chain Infrastructure: Create a national warehousing grid with strategically located, modern facilities to support efficient logistics.
  • Promote Multimodal Transportation: Develop integrated multimodal logistics parks (IMLPs) at key points to ensure smooth transitions between different modes of transportation.
  • Promote Green Logistics: Introduce a sector-specific carbon credit trading system to incentivize and reward emission reductions in logistics.

India’s logistics sector is experiencing robust growth, propelled by government initiatives, infrastructure advancements, and rising technology adoption. By emphasizing multimodal transportation, digitalization, and sustainable practices, India can enhance efficiency, lower costs, and position its logistics industry as a global competitor.


The End of the Blog: Potential of Indian logistics sector

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Frequently Asked Questions by
UPSC Sociology Optional Students

How to prepare for the Sociology Optional without coaching?

Understand the syllabus thoroughly: Familiarize yourself with the entire syllabus for both Paper I and Paper II. Download the official UPSC syllabus and use it as your roadmap. You can attend Sociology Orientation Lectures by Vikash Ranjan sir  on YouTube

Build a strong foundation: Start with introductory textbooks and NCERT books to grasp core sociological concepts. You can start with Introduction to Sociology books

Choose reliable study materials: Select high-quality textbooks, reference books, and online resources recommended by experts. You can opt for Vikash Ranjan Sir Notes too.

Develop a study schedule: Create a realistic and consistent study schedule that allocates dedicated time for each topic. Stick to it and track your progress.

Take notes effectively: Don’t just passively read. Summarize key points, create mind maps, or use other note-taking techniques to aid understanding and revision.

Practice answer writing: Regularly write answers to past year question papers and model questions. Focus on clarity, structure, and critical thinking. Evaluate your answers for improvement.

Seek guidance: You can take free Mentorship on Sociology Optional preparation by Vikash Ranjan sir. Connect with Vikash Ranjan sir (7303615329) to share strategies, ask questions, and stay motivated.  

Can I prepare for Sociology Optional without coaching?

Absolutely! Many aspirants successfully clear the exam through self-study. However coaching can provide structure and guidance, for time bound preparation.

What are the benefits of preparing without coaching?

Cost-effective: Coaching can be expensive, and self-study allows you to manage your resources efficiently.

Flexibility: You can tailor your study plan to your individual needs and pace.

Independence: You develop critical thinking and research skills, valuable assets for your career.

What are the challenges of preparing without coaching?

Discipline and motivation: You need self-discipline to stay on track and motivated without external guidance. Coaching and Teacher keeps you motivated.

Access to resources: You may need to do extra research to find quality study materials and answer-writing practice opportunities. Teacher help you on this respect.

Doubt clearing: You might lack immediate access to someone to address your doubts and questions. Teacher like Vikash Ranjan sir is accessible to his students 24×7   Mo- 7303615329

What additional resources can help me?

Vikash Ranjan Sir’s YouTube channel and website: Offers free Sociology lectures, study materials, and guidance.

Triumph IAS website: Provides past year question papers, model answers, and other helpful resources.

Public libraries and online databases: Utilize these resources for access to relevant books, journals, and academic articles. 


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