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THE TRANSFORMATION OF THE TRANSPORTATION

AND LOGISTICS INDUSTRY

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6/24/24, 11:05 AM Revolutionizing Transport- The Evolution of Logistics | IBEF

 Nov 22, 2023, 16:00  Infrastructure  IBEF

Logistics Industry is crucial to both enterprises and the economy. In today's

interconnected world, shipping and logistics are at the heart of the economy, acting as
vital gateways for international trade and business. A nation with a strong and effective
logistics sector offers an efficient forward and reverse flow of goods and services, which
eventually translates to fast-paced growth. The Indian logistics industry includes all
inbound and outbound components of the manufacturing and service supply chains.
Significant factors that will increase the demand for India's logistics sector include the
country's anticipated GDP growth of US$ 26 trillion by fiscal year 2048 (US$ 6 trillion by
2030) and its objective to accelerate merchandise exports to US$ 1 trillion by 2030. This
would open a huge opportunity for India's transport and logistics sector, which is expected
to increase at a CAGR of 4.5% from 2022 to 2050, reaching 15.6 trillion tonnes kilometres.
The Indian transport and logistics business is expected to be around Rs. 13-16 lakh crore
(US$ 156.18-192.23 billion) in 2022. By 2030, India wants to lower its logistics expenditures
from 13-14% of GDP to 8-10% of the GDP. It is projected that a 10% reduction in indirect
logistics costs is expected to result in a 5% to 8% increase in exports. According to the
Logistics Performance Index (LPI) of the World Bank, India has climbed six positions to
reach the position of 38th rank out of 139 nations. The improvement is attributed to a
variety of factors, including technological advancement, data-driven decision-making, and
legislative initiatives targeted at promoting world-class infrastructure. The National
Logistics Policy (NLP) and the PM Gati Shakti programme are significant overarching
policy moves taken by the central government in this area to deliver outcomes by 2024-25.

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 income for more than 22 million people. The overall logistics sector in India includes 37
6/24/24, 11:05 AM Revolutionizing Transport- The Evolution of Logistics | IBEF
export promotion councils, 40 Participating Government Agencies (PGAs), 20 government
agencies, 10,000 goods, and 500 certifications. Between the financial years 2015-16 to 2019-
20, India invested approximately US$ 10.2 trillion in the development of infrastructure. The
freight movement in India is significantly prejudiced towards road transportation, which
transports 66% of goods (in ton-kilometres). This is followed by rail (31%), shipping (3%), and
air (1%). To facilitate cargo transportation, India has a vast network of support
infrastructure, including 129+ inland container depots, 168+ container goods stations, and
300 m sq. ft. of warehouse capacity. The logistics sector in India can be divided into the
following

categories:
1. Transportation
Surface Transportation
The surface transport sector is anticipated to experience the fastest growth in India's
infrastructure sector, with a CAGR of more than 8% in 2020. Additionally, the trucking
sector is very unorganised and fragmented. Less than five trucks make up the fleet of
70% of the truck owners in the industry. Through different asset monetisation

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 sector can be further divided into the following categories:
6/24/24, 11:05 AM Revolutionizing Transport- The Evolution of Logistics | IBEF

Source: Aviral and Indian Chamber of Commerce (ICC)

 Full Truck Load (FTL)
The FTL market contributes significantly to the Transportation sector. The FTL
market was anticipated to be around US$ 120 billion in 2021. It is expected to
increase at a rate of 7-8% in the upcoming years (2022 onwards).

 Part Truck Load (PTL)

In terms of revenue, the PTL ranks as the second-largest contributor to the Indian
surface transportation industry. In 2021, it was expected to be worth approximately
US$ 12 billion, with an annual growth rate of 8-10%. Part truckload services are
becoming increasingly popular around the country.

 Express
While India has less than 2% of the global express business, it has one of the fastest-
growing express industries. The Indian Express market is fragmented, and there are
reportedly 1,000 active players. The domestic express market is dominated by
approximately 15 large competitors. The remaining players range in size from small
to medium-sized enterprises. The sector was expected to grow at a CAGR of
around 15% by 2020, reaching US$ 5.5 billion.
Railways

India has the world’s fourth-largest rail network and accounts for the second highest
percentage of goods moved in terms of volume. From April to September 2023, a total
freight loading of 758.20 million tonnes (MT) was obtained, compared to a loading of
736.68 MT the previous year, representing a rise of around 21.52 MT. During September
2023, Indian Railways loaded 59.70 MT of coal, 14.29 MT of iron ore, 5.78 MT of pig iron and
finished steel, 6.25 MT of cement (excluding clinker), 4.89 MT of clinker, 4.54 MT of
foodgrains, 4.23 MT of fertiliser, 4.0 MT of mineral oil, 7.28 MT of containers, and 10.10 MT of
rest of all other goods. The average speed of freight trains on the Dedicated Freight
Corridor (DFC) will more than double with the inauguration of DFC. In 2021, India pledged

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6/24/24, 11:05 AM Revolutionizing Transport- The Evolution of Logistics | IBEF

Note: P-Provisional
Source: Aviral and Indian Chamber of Commerce (ICC)
Waterways

India has a 7,500 km (4,660 miles) coastline that is encircled by the sea on three sides.
India has 200 minor/intermediate ports and 12 big ports, which together, account for 65%
of the country's total value and 95% of its volume of trade. The Indian coast offers a
huge opportunity for the movement of cargo. By 2025, total cargo movement is estimated
to exceed 250 MTPA. Commodities including petroleum, oil, lubricants, building supplies,
and dry bulk cargo like cereal grains, fertiliser, steel, coal, and minerals are ideal for coastal
transportation. On December 15th, 2021, the Government of India (GoI) pledged to invest
Rs. 3-3.5 lakh crore (US$ 38-44 billion) across ports, shipping, and in-land waterways
LOGIN under 
the Maritime India Vision (MIV), which would help unleash Rs. 20,000 crore (US$ 2.40
billion) in potential annual revenue for Indian ports. Indian Government plans to replace
 diesel with electricity for at least half of the vehicles and equipment needed by the major
ports by 2030 and to increase that number to 90% by 2047. The shipping ministry wants
ports to build at least one liquified natural gas (LNG) bunkering station by 2030 and
electric vehicle charging facilities near port areas by 2025 to decrease the usage of petrol.
Moreover, the major ports collectively handled a record-breaking 795 million tonnes of
cargo in 2022-23, registering a 10.4% growth over the previous year.
Airways
Airways account for less than 2% of the total modal mix. The materials transported by
air for freight movement are primarily time-sensitive commodities such as
pharmaceuticals, healthcare, electronics, etc. Airways are not recommended for non-
time-sensitive freight movement of commodities since they are more expensive than
other means of transportation. As of June 30th, 2023, the Regional Air Connectivity
Fund Trust (RACFT) has released Viability Gap Funding (VGF) amounting to Rs. 2,729.11
crore (US$ 333 million) to the selected airline operators for the operation of the
Regional Connectivity Scheme (RCS)-UDAN (Ude Desh ka Aam Nagrik) Scheme. 479
routes are in operation, connecting 74 airports, including two water aerodromes, and
nine heliports, based on the four rounds of bidding under UDAN. The Scheme has
benefitted around 123 lakh passengers.

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 2. Warehousing Industry
6/24/24, 11:05 AM Revolutionizing Transport- The Evolution of Logistics | IBEF
A warehouse is an essential component of corporate infrastructure and one of the primary
enablers in the global supply chain. the Indian warehousing market is predicted to reach
Rs. 2,872.10 billion (US$ 34.50 billion), expanding at a CAGR of 15.64% from 2022 to
2027. With increased demand and supply throughout the years, the Indian warehousing
industry is gaining traction. The key players are third-party logistics (third-party logistics)
and e-commerce enterprises, which are growing into tier 2 and 3 cities and eventually
increasing their proportion of secondary marketplaces. With a market share of more than
60%, 3PL and e-commerce are the largest lessors of storage space. To assist this expansion,
the government is building multimodal logistic parks and other projects that connect
urban transit to railways, attracting investments from institutional funds and developers.
3. Value Added / Other Services
Value-added/other services include a variety of operations such as customs clearing,
Logistics packaging, Inventory management, Material handling equipment, etc.
Custom clearing

Customs clearance is a time-consuming and difficult process that necessitates much

documentation and coordination. However, many established businesses and startups
nowadays are utilising technological platforms to streamline this process. Customs
automation has aided the industry and made operations more efficient.
Freight Forwarding

Freight forwarding is the business of organising shipments for individuals or corporations

to move commodities from the manufacturer to an international buyer. The freight
forwarder serves as a liaison between the liner and the shipper. A freight forwarder
streamlines the procedure and provides the customer with an estimated price rate after
adding his margin.
Logistics Packaging

Packaging is an essential component of the overall supply chain. Proper packaging

services are essential for businesses before the goods are delivered to the customer.
Key Trends
1. Green logistics technology
The use of green logistics technology, such as tools for measuring the climate, real-time
data collection tools, electric vehicles, green cold chain solutions, electric cargo delivery
drones, and platforms for managing logistics resources, can have a variety of advantages,

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 2. Embracing digital ecosystems
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Ecosystem collaboration

Collaboration among technology providers, logistical service providers, and customers

backing innovation, knowledge sharing, and the acceleration of digital transformation.
Collaborative ecosystems offer seamless integration, streamline processes, and provide
greater consumer experiences.
Supply chain orchestration

End-to-end supply chain orchestration is facilitated by advanced platforms and digital

markets. By utilising these platforms, businesses are able to connect with a large network
of suppliers, transporters, and service providers, which helps to streamline logistics
processes and shorten time-to-market.
Rise of cross-border e-commerce

The rapid expansion of e-commerce has had a tremendous impact on the logistics
business, resulting in a surge in demand for foreign goods and MSMEs selling in the
international markets. The growth is being driven by millennials, who make up a major
share of the professional purchasing decision market and anticipate online shopping
interfaces. As a result, efficient and dependable delivery services have become essential,
resulting in the creation of cross-border digital markets with significant economic growth.
4. Technological innovation
Artificial intelligence (AI) and machine learning (ML)

AI-powered algorithms and machine learning models enable predictive analytics, demand
forecasting, route optimisation, and real-time decision-making. These solutions enable
organisations to optimise their supply chains, better allocate resources, and provide better
consumer experiences.
Internet of Things (IoT)

With the proliferation of IoT devices, logistics organisations have increased visibility and
control over their assets and inventories. Real-time tracking, remote monitoring, and
predictive maintenance are made possible by IoT sensors and connectivity, allowing
proactive and efficient logistics operations.
Robotics and automation

Automation technologies such as robotic process automation (RPA) and autonomous

vehicles are altering warehouse operations and last-mile delivery. Robotics automates

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 The uneven distribution of modes of transport has resulted in low operational efficiency,
causing the GOI to launch a number
6/24/24, 11:05 AM
of logistics-specific programmes, including GatiShakti
Revolutionizing Transport- The Evolution of Logistics | IBEF
and the National Logistics Policy. These initiatives seek to improve India's logistics sector
by making it more environmentally friendly, agile, transparent, and integrated. The
logistics management regimen is capable of overcoming infrastructural disadvantages in
the short term while providing cutting-edge competitiveness in the long term. Physical
transporters that execute their business processes manually and offline can use various
technologies such as AI, Big data, and IoT to improve their service and compete in an
international market by delivering real-time and end-to-end connections.
To realise the full potential of the sector, stakeholders such as service providers, customers,
and the government of India must work and complement one another. The sector is
experiencing significant infrastructural expansion, a stronger emphasis on digitalization,
and a larger emphasis on sustainable logistics. The launch of numerous start-ups, as well
as the Government's digital initiatives such as "Make in India," Unified Logistics Platform
(ULIP), and others, are assisting in bringing greater transparency to the logistics sector. The
digitization of work processes to enable paperless processing of paperwork and
clearances, as well as improved shipment tracking, aids in increasing the pace of goods
movement and lowering logistics costs.

Partners

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