Recently, the third anniversary of the National Logistics Policy (2022) was commemorated by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.

• On the occasion of a decade of Make in India, the Union Minister of Commerce and Industry launched the first-ever scientifically derived report on logistics costs in India.
  • It has been prepared by the National Council of Applied Economic Research (NCAER) for the Department for Promotion of Industry and Internal Trade (DPIIT).
• Other Major Launches:
  • Industrial Park Rating System (IPRS) 3.0: Offers investors transparent and credible information.
    • Encourages competition among States and Union Territories (UTs).
    • Aids policymakers in targeted interventions.
  • Logistics Data Bank (LDB) 2.0: Enhances tracking, monitoring, and efficiency in the logistics value chain.
  • Logistics Ease Across Different States (LEADS) 2025: Benchmarks logistics performance across States and UTs.
    • Strengthens India’s globally competitive logistics ecosystem.
  • Make in India Commemorative Coin: Symbolises a decade of the Make in India initiative.

Key Highlights of the Report on “Assessment of Logistics Cost in India”

• Comprehensive Assessment: Provides a comprehensive framework to capture logistics costs across different transport modes, product categories, and firm sizes.
• Logistics Cost Estimate: Estimates logistics costs at ~7.97% of Gross Domestic Product (GDP) (vs earlier misrepresented 13–14%).
• Freight & Multi-Modality: Presents freight cost per tonne-kilometre and highlights the role of multi-modality in enhancing efficiency.
• Methodology: Uses a hybrid methodology combining secondary data and nationwide surveys.

What Is Logistics?

• Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their final destination. 
• Logistics management involves identifying prospective distributors and suppliers and determining their effectiveness and accessibility. 

Overview of the Logistics Landscape in India

• Global Standing: India’s logistics sector is one of the largest globally, ranked 38th among 139 countries in the World Bank’s Logistics Performance Index 2023, showcasing steady improvement in efficiency and infrastructure​​.
• Dedicated Logistics Unit: In July 2017, a separate logistics unit was created under the Department of Commerce to oversee the Integrated Development of Logistics Sector.
• Market Size & Growth: Valued at USD 215 billion in 2021, the sector is expected to grow at a compound annual growth rate (CAGR) of 10.7% till 2026.
• Modes of Transport:
  • Road Transport: Accounts for 66% of cargo movement, but faces challenges like poor road conditions and congestion.
  • Rail Transport: Handles 26% of freight but requires modernization and increased capacity.
  • Air and Waterways: Contribute 1% and 3%, respectively, but hold potential for growth through government initiatives like Sagarmala​​.
    • Inland Waterways: Cargo movement reached 145.5 million tonnes in 2024–25; operational waterways increased from 24 to 29.
• Technological Adoption: India is transitioning to a digitally integrated logistics ecosystem with technologies like AI, IoT, blockchain, and automation. 
  • However, the adoption rate is still lower compared to global standards​​.
• E-commerce and Trade Growth: The rise of e-commerce and cross-border trade has accelerated demand for logistics services. 
  • Companies like Amazon and Flipkart rely heavily on advanced logistics to meet customer expectations for faster delivery​​.

Importance of Logistics in India

• Economic Contribution: Logistics contributes 13-14% to India’s GDP, showcasing its pivotal role in driving economic growth. 
• Facilitates Trade and Commerce: A robust logistics sector supports domestic and international trade by enabling the seamless movement of goods. 
• Job Creation and Employment: The logistics sector is one of the largest employment generators, providing jobs to over 22 million people in India. 
  • Additionally, it is projected to add 10 million jobs by 2027, contributing significantly to economic empowerment​​.
• Reduces Cost and Enhances Competitiveness: Efficient logistics operations reduce transportation and warehousing costs, allowing businesses to offer competitive pricing. 
  • For example, the introduction of GST reduced truck waiting times at state borders, decreasing logistics costs and increasing supply chain efficiency​​.
• Supports E-commerce Growth: The rise of e-commerce has increased the demand for efficient logistics solutions, including last-mile delivery and cross-border trade. 
  • For instance, platforms like Amazon and Flipkart rely on advanced logistics networks to meet customer demands for faster and reliable delivery​.
• Boosts Supply Chain Efficiency: A well-functioning logistics sector ensures smooth and timely supply chain operations, reducing lead times and optimizing production. 
  • For example, the development of Multi-modal Logistics Parks (MMLPs) has improved freight handling, lowering overall supply chain costs​​.
• Sustainability in Logistics:
  • Green Logistics: Adoption of environment-friendly practices through policy and infrastructure.
  • Freight Greenhouse Gas (GHG) Calculator: Measures transportation cost and greenhouse gas emissions, enabling awareness and support for sustainable logistics practices.
  • Rail Green Points: Encourages rail-based freight to reduce carbon emissions; aims to raise rail freight share to 45% by 2030.
  • Digital Support: Platforms like ULIP enable greener transport choices by companies.

Key Government Initiatives in Logistics

• Sagarmala Project (2015): It is a flagship initiative by the Ministry of Ports, Shipping and Waterways of the Government of India to develop India’s maritime sector: 
  • Its goal is to reduce logistics costs, improve port efficiency, and promote coastal community development.
• Goods and Services Tax (GST) & E-Way Bill: GST (2017) streamlined goods movement, reduced transit delays, simplified taxation.
  • E-Way Bill: Mandatory for goods more than ₹50,000 across states; enhances transparency and compliance.
• PM GatiShakti Master Plan (NMP): Launched in October 2021 to integrate multi-modal transport into a coordinated network.
  • 57 central ministries and 36 states/UTs integrated with 1,700 data layers for unified infrastructure planning.
• Maritime Amrit Kaal Vision 2047: Long-term roadmap for maritime sector aligned with blue economy principles.
  • Focus on port capacity, digitization, automation, hydrogen hubs, coastal tourism, shipbuilding, and skill development.
  • Investments: ₹10 lakh crore committed at Global Maritime India Summit (GMIS) 2023.
• Logistics Data Bank (LDB), 2016: Tracks EXIM cargo; over 75 million containers monitored as of October 2024.
  • Usage: 45 lakh unique container searches per month; enhances transparency and efficiency.

• Dedicated Freight Corridors (DFCs):
  • Eastern DFC: Ludhiana to Sonnagar (1,337 km).
  • Western DFC: Jawaharlal Nehru Port Terminal to Dadri (1,506 km).
  • Status: 2,741 km (96.4%) operational as of March 2025.
  • Objective: Reduce congestion, lower costs, improve energy efficiency, and boost industrial development.
• Unified Logistics Interface Platform (ULIP): Integrates data from various ministries on a single platform.
  • Recorded 100 crore API transactions by March 2025.
  • Supports shipment ETAs, inventory management, and operational cost reduction.
• Multi-Modal Logistics Parks (MMLPs), 2017: Large-scale warehousing and storage hubs under Bharatmala Pariyojana.
  • 35 locations approved, 5 operational by 2027.
  • Aim to reduce logistics costs and improve supply chain efficiency.
• Gati Shakti Vishwavidyalaya (GSV): India’s first university for transport and logistics education.
  • Trains skilled professionals to support National Master Plan goals.
  • Signed MoUs with ~40 institutions.
• Logistics Ease Across Different States (LEADS): Annual report assessing infrastructure, services, regulatory environment, and sustainability.
  • Provides insights to guide policy and investment decisions.

Challenges with Logistics Sector in India

• High Logistics Costs: Logistics costs in India account for 13-14% of the GDP, compared to the global benchmark of 8-10%. 
  • This increases the cost of Indian goods, making them less competitive in international markets. 
• Fragmented Industry Structure: The logistics sector is highly fragmented, with small, unorganized players dominating 80% of the market. This results in poor resource optimization and inefficiencies. 
  • For example, most trucking companies operate with fleets of fewer than five trucks, limiting scalability​​.
• Inadequate Infrastructure: India’s logistics infrastructure, including roads, railways, ports, and warehouses, is insufficient to handle the growing demand. 
  • Only 31% of freight moves through rail, despite it being more cost-efficient than road transport, which handles 66% of cargo​​.
• Skill Shortage: The sector faces a significant shortage of skilled workers in supply chain management and logistics technologies. Limited vocational training and industry-specific education exacerbate this issue. 
  • For example, despite the growing demand for advanced warehousing and technology-enabled logistics, training programs remain sparse​​.
• Regulatory Complexity: Complex and inconsistent regulatory frameworks, including multiple tax structures and compliance requirements, create operational barriers. 
  • The introduction of the Goods and Services Tax (GST) has helped streamline some processes, but further harmonization is needed​.
• Last-Mile Connectivity Issues: Last-mile delivery faces challenges such as poor road infrastructure, traffic congestion, and inadequate address mapping in urban and rural areas. 
  • For instance, delays in last-mile connectivity impact e-commerce deliveries, leading to customer dissatisfaction​​.
• Technological Gaps: While the sector is moving towards digitization, the adoption of advanced technologies like AI, IoT, and blockchain is still limited compared to global standards. 

Way Forward

• Reduce Logistics Costs: Focus on reducing logistics costs to align with global benchmarks of 8-10% of GDP. 
  • This can be achieved through infrastructure modernization, promoting multi-modal transportation, and adopting cost-efficient technologies like automation and AI-driven analytics​​.
• Strengthen Infrastructure Development: Accelerate the development of dedicated freight corridors, multi-modal logistics parks, and coastal shipping networks. 
  • Investments in road and rail connectivity, especially for last-mile delivery, will significantly enhance logistics efficiency​​.
• Promote International Collaboration: Strengthen international partnerships to enable shared infrastructure, data exchange, and coordinated decision-making. 
  • For example, the India-Middle East-Europe Corridor (IMEC) aims to establish seamless connectivity between India and Europe through the Arabian Peninsula​​.
• Attract Investments and Enhance Private Sector Participation: Leverage initiatives like the National Infrastructure Pipeline (NIP), which aims to mobilize ₹50 lakh crore (approximately $650 billion) for infrastructure projects. 
  • While 100% FDI is permitted in most transport infrastructure development initiatives, additional policy measures and incentives are needed to attract more private and foreign investments, ensuring the desired impact on infrastructure growth​​.
• Encourage Digital Transformation: Promote widespread adoption of technologies such as blockchain, Internet of Things (IoT), and artificial intelligence (AI) across logistics operations. 
  • These technologies can improve transparency, optimize routes, and reduce transit times​​.
• Policy Harmonization and Simplification: Further streamline regulations and simplify compliance through single-window systems like the Unified Logistics Interface Platform (ULIP). 
  • Harmonizing tax structures and regulatory frameworks across states can improve ease of doing business​​.
• Enhance Skill Development: Address the skill gap in the logistics sector by introducing specialized training programs in supply chain management, warehousing, and technology-enabled logistics. 
  • Public-private partnerships with educational institutions can bridge this gap​.
• Focus on Sustainability: Encourage green logistics practices such as the adoption of electric vehicles, eco-friendly packaging, and carbon-neutral supply chains. 
  • The government and private players should invest in sustainable solutions to reduce the environmental impact of logistics operations​​.

Conclusion

Logistics is a key enabler of growth, jobs, and balanced development. By strengthening supply chains, India moves closer to becoming a USD 5 trillion economy and achieving the vision of Viksit Bharat 2047.

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