“Beware of little expenses, a small leak will sink a great ship.” A famous quote by Benjamin Franklin

India's high logistics cost has been the proverbial leak that has reduced the competitiveness of the Indian exports and the economy in general. India's logistics cost adds up to somewhere between 14 per cent of the GDP while the global average logistics cost to an economy is approximately 8%.

In India, the Logistics Division1 in the Department of Commerce was created after an amendment to the Second Schedule of the Government of India (Allocation of Business) Rules, 1961, on 7th July 2017, that allocated the task of “Integrated development of Logistics sector” to the Department of Commerce. The division has been given the mandate to develop an Action Plan for the integrated development of the logistics sector in the country, by way of policy changes, improvement in existing procedures, identification of bottlenecks and gaps and introduction of technology in this sector.

Logistics form the backbone of an economy. It impacts all the three key sectors- agriculture, manufacturing and services. In India, the logistics sector has traditionally functioned inefficiently, thereby depriving the industry from actualising its full potential. There is a yawning gap of US$180 Billion per annum that needs to be bridged if the country has to achieve the target of becoming a US$5 Trillion economy.  

The logistics sector includes within itself storing, warehousing and transportation of raw materials, CNG, LNG, petroleum, livestock, dry bulk cargo, food grains, construction material, equipment, etc., across different locations in the country that is from the production zones to distribution and consumption zones.

Amongst the many reasons causing poor productivity in the logistics sector is lack of automation. India has been a capital deficit and labour surplus country, which makes it more economical to deploy cheap labour than to invest in expensive technology. Despite of the high cost of logistics, industry units struggle to make profits and lose out to global competition as they  lack cost competitiveness.  In the current scenario there clearly is a lack of incentive for employing automated and technology driven processes over the ones employed traditionally.

To bolster the efforts towards strengthening the infrastructure sector, the government rolled out the ambitious PM Gati Shakti National Master Plan2 in 2021 for seamless multi-modal connectivity which will form the bedrock for development world-class infrastructure that not only fosters people to people connectivity but also strengthen the logistics sector with a view to give a competitive edge to Indian industry in line with the government's vision of Ease of Doing Business and Ease of Living.

Continuing with the bullish trend in policy making the Prime Minister recently announced the National Logistics Policy (NLP)3. The NLP is a comprehensive effort towards promoting seamless movement of goods across the country and improving the competitiveness of Indian goods in domestic as well as export markets while also addressing the persistent issues of high cost and inefficiency in the logistics sector. The policy lays down a  cross-sectoral and interdisciplinary framework for rejuvenating the entire logistics ecosystem. The policy is a strong step towards improving the competitiveness of Indian goods and catalysing economic growth as well as  increasing employment opportunities.

The National Logistics Policy along with PM Gati Shakti plan will aid in building a resilient logistics ecosystem in India. NLP has been prepared in active consultation with the union ministries of road transport, civil aviation, railways and shipping and forty six partnering government agencies.

The Policy will be implemented through a Comprehensive Logistics Action Plan4 (CLAP). The interventions proposed under the CLAP are divided into eight key action areas:(i) Integrated Digital Logistics Systems (ii) Standardisation of physical assets and benchmarking service quality standards (iii) Logistics Human Resources Development and Capacity Building (iv) State Engagement (v) EXIM (Export-Import) Logistics (vi) Service Improvement framework (vii) Sectoral Plan for Efficient Logistics (viii) Facilitation of Development of Logistics Parks.

The government also launched the Unified Logistics Interface Platform ULIP5 that will bring all the digital services related to the transportation sector into a single window platform for all transportation services freeing the exporters from long and cumbersome processes. A new digital platform–Ease of logistics Services or E-Logs–has also been launched through which industry associations can take up any issues causing problems in their operations and performance, with the government agencies. Since the ULIP platform brings shippers and transporters on a single platform, the truckers which used to return empty due to poor visibility of orders are more likely to find loads for the return trip as well making the entire cycle profitable.

The NLP, in conjunction with the government's other flagship programmes like Gati Shakti, Bharatmala and Sagarmala schemes, the Dedicated Freight Corridors, etc. can be transformational for the economy.

The NLP  encourages multimodal transport like roads, railways and waterways. It envisions greater efficiency by ensuring 25-30% freight movement by roads, 50-55% by railways and 20-25% via waterways. Presently, more than 60% of the freight movement happens through roads which is a fossil fuel guzzler and does not sits well with the government's vision of achieving net zero by 2070 while railways account for 25-28%, with the rest of it contributed by shipping and waterways.

 This transformational approach towards sustainable economic development hinges on the rapid development of roads, railways, mass transport, ports, waterways and airports.

The Digital Transformation that is silently underway will re-define Indian logistics sector over the next few decades as the policy vision will be realised only through digitisation, automation, use of technology and the speed of implementation.


1 https://dpiit.gov.in/logistics-division

2 https://www.india.gov.in/spotlight/pm-gati-shakti-national-master-plan-multi-modal-connectivity

3 https://pib.gov.in/PressReleasePage.aspx?PRID=1859893

4 https://pib.gov.in/PressReleasePage.aspx?PRID=1859893

5 https://pib.gov.in/PressReleasePage.aspx?PRID=1859893

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