Indian logistics sector – Far from Cry
Indian logistics sector – a hidden hurdle
Friday May 01, 2020,
5 min Read
The Indian Logistics industry is likely to touch USD 215 billion in coming two years which is right now worth around USD 160 billion, Economic Survey 2017-2018 said.
GST implementation helping to realize the robust growth in the logistics industry which will touch USD 215 billion in “2020, growing at a CAGR of a 10 per cent.” Economic Survey 2017-18 tabled in Parliament said.
As far as employment generation is concerned the logistics industry provides employment to more than 22 million people has grown at a compound annual growth rate CAGR of 7.8 per cent during the last five years it said.
India has jumped to 35th rank in 2016 from 54th rank in 2014 in terms of overall logistics performance by the report from world Bank’s 2016.
Realizing the importance of logistics for the growth of country economic atmosphere government has put this industry under the Harmonised Master List of Infrastructure Sub Sector to address the inefficiencies of this sector. This will help in facilitating the credit flow into the sector with longer tenures and reasonable interest rates. It will also help in simplifying the entire process as the construction of multi-modal logistics parks that includes both storage and transport infrastructure. It will also increase the investment from different sectors to the logistics sector.
The fact presented above is really encouraging for the logistics sector. There is a hidden fact too which must be addressed in the first place otherwise the dream to have a world-class logistics ecosystem in India will remain a dream. To a large extent logistics industry in India is still unorganized which creates a hidden bottleneck which pulls back overall performance of the logistics industry and also adversary impacts on the overall economy of the country and individual firm.
At present logistics industry which is driven by the unorganized sector is facing challenges of high cost which impact the competitiveness in the domestic and global market. Fragmented warehouse, underdeveloped material handling infrastructure, lack of seamless movement of goods, lack of utilizing high technology and many more other challenges which have become a hurdle in the current logistics sector. The total logistic cost is around 15% of Indian GDP which makes goods costlier to the end consumers. In an effect of high cost, it reduces the export and import business. Improving the logistics sector has a huge implication on exports, and it is estimated that a 10 per cent decrease in indirect logistics cost can increase 5-8 per cent of exports. High logistics cost also affects the total domestic consumption of the goods. High logistics cost is one of the main causes in increasing the overall Consumer Price Index (CPI) and Wholesale Price Index (WPI) at the result India’s growth rate comes down against it is supposed to be.
Organizing the unorganized logistic sector is one of the main cures to the problem. Organized logistics sector will attract the latest technology, will increase the investment to enhance the infrastructure, will create more skill, will help in removing bottlenecks, it will improve intermodal transportation, will bring automation to the system. Overall it will help to bring logistics cost down and will improve the last-mile experience for the end consumer. It will also help the enterprise in cutting the logistics cost and will improve competitive advantage by rendering a specialized high technology-driven logistics service from an organized logistics service provider.
The improved logistics ecosystem will increase trade. Better performance in logistics is required to boost to Make in India initiative and also help India to become an important part of the global supply chain. Moving from unorganized to organize logistics system will reduce the overall logistics cost and also increase the competency. The logistics industry has moved towards getting organized, but it is just a beginning. A long mile has to go to become a world-class logistics provider country. Few companies have come into the logistics industry to change the entire logistics experience. These companies are developing technology to give better end-customer experience at a low cost. As one of them is City Link portal Pvt Ltd – Bangalore which has its own IT and R&D Lab to create a world-class logistics technology product. Truckguru – Vadodara which provides last-mile connectivity in the major city of India. And few more companies who are trying their level best to change the end customer experience by utilizing their innovation and resources. But it needs more such players and will surer attract big companies in future. The logistics industry is having a lot of challenges but simultaneously it is having a lot of opportunities too.
“Alibaba founder Jack Ma says the goal is to build the backbone of a smart network that will improve the company’s reach and efficiency, and drive down costs.”
As getting the logistic sector organized it will attract more players and more investment from other sectors. These FDI will be used in increasing the infrastructure will bring the latest technologies to the system? In the end, end consumers will get delighted by getting goods on time at a cheaper price. Now Indian consumers’ consumption habit has become five stars, so the delivery system must also be five stars to match the consumer’s aspiration.
Enhanced logistics sectors will also empower Indian villagers to access the word class product at their doorstep in stipulated time at the affordable cost. This will be a real homage from a country to its father of the nation Mahatma Gandhi’s. Mahatma Gandhi’s dream was to do the service to the last man who resides in the village of India.
A single-window clearance system, the simplified process from policymaker and law enforcement agency will add more feathers to the Indian logistics sector to touch its glory. At last, enhancing the last mile delivery experience at the affordable cost will give a boost to the logistics sector as well as the overall Indian economy ecosystem.