30th December 2024 (12 Topics)
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India’s Logistics Sector
Context
The logistics sector in India made significant progress in 2024 towards achieving the goals outlined in the National Logistics Policy (NLP) launched in 2022. The sector saw improvements in efficiency, cost reduction, and infrastructure, driven by key government initiatives and reforms.
Current status of India’s Logistics Sector
- The logistics sector contributes around 13-14% to GDP and provides livelihood for more than 22 million people.
- It enables timely delivery, decreases costs, and enhances competitiveness, crucial for thriving businesses.
- The logistics industry employs over 22 million people in India, making it a significant contributor to the country’s employment landscape.
- The demand for India's logistics sector is expected to rise significantly due to several key factors.
- India's projected GDP growth of USD 26 trillion by fiscal year 2048 (with USD 6 trillion by 2030) and the goal of boosting merchandise exports to USD 1 trillion by 2030 will create substantial opportunities for the transport and logistics industry.
- Projections suggest that the sector will grow at a CAGR of 4.5 per cent from 2022 to 2050, reaching 15.6 trillion tonnes.
Key Developments in 2024:
- Logistics Cost Reduction: India’s logistics cost remains high at 10-14% of GDP, but the government aims to reduce this. Efforts to lower logistics costs were emphasized after India improved its World Bank Logistics Performance Index ranking to 38th globally in 2023.
- The Goods and Services Tax (GST) has notably cut waiting times at state borders, reducing truck travel time by nearly 30%, thereby helping to reduce logistics costs and increasing the average distance trucks travel.
- Infrastructure and Investment: The logistics sector saw significant investments in infrastructure, with a 1% increase in capital expenditure for infrastructure development. This growth aligns with India’s ambition to become a $5 trillion economy by 2027.
- Progress in multi-modal connectivity was marked by improvements in rail, waterway, and highway infrastructure. The Sagar Sethu maritime portal and other digital initiatives like the Coastal Shipping Bill and Sagar Ankalan portal are helping to modernize port logistics.
- Digital Transformation and Policy Support: The logistics industry experienced transformative changes in 2024, including deeper digital adoption and enhanced focus on risk management.
- The One Network for Digital Commerce (ONDC) and government-backed initiatives like UDAN (to promote regional air connectivity) contributed to enhanced logistics efficiency.
- Growth Prospects: The logistics sector, valued at USD 250 billion and contributing 14% to India’s GDP, is expected to continue growing, supported by increased e-commerce demand, faster delivery needs, and expanding exports.
Challenges and Future Focus:
- Despite significant progress, there is need for further technology integration to reduce logistics costs and improve the ease of doing business.
- Maritime connectivity projects identified in the Union Budget with an outlay of Rs 75,000 crore need to be expedited to strengthen coastal transportation.
Government measures targeting India's logistics
The Goods and Services Tax (GST) has significantly decreased the cost of logistics. The “one nation, one tax” policy has reduced truck wait times at state crossings, which has resulted in a nearly 30% reduction in travel time. Digitalisation, augmented connectivity, and the adoption of cutting-edge innovations such as Radio Frequency Identification (RFID) and Global Positioning System (GPS) are bolstering operational efficiency while mitigating costs. |
PYQ
Q: The Gati-Shakti Yojana needs meticulous coordination between the government and the private sector to achieve the goal of connectivity. Discuss (UPSC 2022)
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