Enabling effective and timely movement of goods from one place to another for industrial or private purpose with minimum use of resources is the prime intention of logistics industry. The Indian logistics industry is estimated at a value of $14 billion US dollars and is expected to be worth $385 billion in 2015 paving way to a lot of job opportunities in this sector. In comparison to developed countries like USA and JAPAN spending 10% of its GDP on logistics and Europe spending 11%; India spends around 13% of its GDP on logistics.
The demand for Indian Logistics services have been largely driven by the remarkable growth in Indian Economy featuring rising investment, mega infrastructure projects, rapidly evolving regulatory policies and several other developments which have simultaneously been successful in gradually overcoming infrastructure related constraints and logistics industry centric inefficiencies.
Some Challenges faced by Indian Logistics Industry:
- Delay in project executions due to issues in procedural clearances resulting in time and cost over runs.
- High congestions on roadways and ports impacting the turnaround time and service levels across the supply chains.
- Slower corporatization of major ports and awarding port projects to private investors has impacted port efficiency.
- Delay in GST implementation-Levitation of taxes at a national level instead of individual states will cut down on logistics cost and increase cross border transportation.
- Lack of integrated planning via a unified regulatory logistics body at the Union level, lack of clarity on regulations increasing nervousness and hassle for investors and operators.
- Warehousing sector in India forms 20% of the logistics market but faces challenges in the form of inadequate skilled labour, lack of infrastructure, lack of funds etc. Currently India faces a need for another 123 million tones of warehousing.
Different Mediums of Logistics services in India:
- Total Indian freight traffic registered a CAGR of 6.2 per cent over FY06-14. Domestic freight traffic increased at a CAGR of 7.1 per cent over FY06-14 while international freight traffic rose 5.8 per cent over the same period. The freight traffic is expected to be 11.4 million tonnes by 2032
- FDI inflows in air transport (including air freight) during April 2000 to January 2015 stood at US$ 562.65 million
- Aircraft movements, passengers and freight at all Indian airports are expected to grow at a rate of 4.2 per cent, 5.3 per cent and 5 per cent, respectively, for the next five years
- The Government of India (GOI) envisions airport infrastructure investment of US$ 11.4 billion under the Twelfth Five Year Plan (2012-17). It has opened airport sector to private participation, and has approved the construction of six airports across major cities under the PPP model to improve connectivity. It has also allowed 100 per cent foreign direct investment (FDI) under automatic route for Greenfield projects and 49 per cent FDI for foreign carriers.
- The value of roads and bridges infrastructure in India is projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12–17. The country’s roads and bridges infrastructure, which was valued at US$ 6.9 billion in 2009 is expected to touch US$ 19.2 billion by 2017.
- The Government of India has set aside 20 % of the total investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (2012–17) to develop the country’s roads.
- The government is set to offer 9 road projects this year with a cumulative length of 895 km and project cost of Rs 17,815 crore (US$ 2.82 billion)
- The rail freight grew by 1.1 per cent in March 2015 and by 4.2 per cent during April-March 2014-15, both on year-on-year basis. The net tonne kilometers of rail freight grew by 1.1 per cent in March 2015 and by 5.2 per cent during April -March 2014-15, year-on-year. Total revenue from commodities increased by 12.7 per cent in 2014-15.
- In January 2015, the revenue earning freight traffic carried by Indian Railways was 97.79 MT which was 1.39 MT over the actual freight traffic of 96.40 MT carried by Indian railways during the same period last year indicating an increase of 1.44%.
- The government has cleared a proposal to allow 100 per cent FDI in railway infrastructure.
- The cargo handled in major ports grew by 1.1 per cent to 47.9 million tonnes in April 2015 from 47.4 million tonnes in April 2014.
- Cargo capacity in India is expected to increase to 2,493.1 million metric tonnes (MMT) by 2017 from 1,245.3 MMT in FY12.
- By FY17, cargo traffic at major ports in India is expected to rise to 943.1 MMT and at non-major ports in India is expected to grow to 815.2 MMT.
- The Planning Commission of India in its 12th Five Year Plan projects a total investment of Rs 180,626 crore (US$ 28.57 billion) for India’s port sector.