What makes India a lucrative market for a logistics player?

In the last few years, India has emerged as one of the fastest-growing large economies of the world. It now stands as one of the top global destinations for foreign direct investment. As a result of globalization and digitalization, the logistics sector is expected to grow at a CAGR of 8-10% by 2020.[3] Increased economic activity as well as changing consumer expectations will drive more businesses towards using express delivery services. With the rise of e-commerce in the last decade, customers today want goods delivered as fast as possible. Companies, therefore, will need to manage their supply chains and product distribution to be more time-specific and efficient. On-demand logistics companies, relentless in their quest for optimal and time-conscious operations, will lead the charge in improving how goods in India move from one point to the other.

As the country gears to break into the USD 5 trillion clubs by 2025 [1], a heavy emphasis has been placed on boosting manufacturing, which will require an increase in the transportation of raw materials to centres of production along with delivering manufactured goods to end customers. With rural areas agglomerating to form tier 2 and tier 3 cities, it is also estimated that roughly 300 million Indians will come to inhabit these cities by 2025. With growing disposable incomes and higher aspirations, the Indian population is projected to spend an astonishing USD 104 billion just on fast-moving consumer goods (FMCG) alone. [2] Bringing these products to the market or into people’s homes will require new supply chains and the logistics industry will be relied upon to bridge this gap.

On average, logistics accounts for anywhere between 8% and 20% of a country’s Gross Domestic Product (GDP). India’s logistics costs represent 14% of GDP and the country is aiming to reduce it to less than 10% of GDP by 2022. Reductions in logistics costs will lend a competitive advantage to Indian exports and reduce the overall production cost. [5]

With the implementation of the Goods and Service Tax (GST), there have been monumental changes in the sector resulting in the creation of one big market with fewer and bigger warehouses. It will result in the greater adoption of a hub and spoke model in segments such as warehousing, container freight stations, cold chain, and inland container depots. It will bring scale to logistics companies as there will be an increase in savings, a decrease in wastage and fewer delays. This will lead to greater economies of scale for transport operators and allow more companies to outsource their logistics operations.

Consistent improvements in transport facilitation and the government’s grant of infrastructure status to the sector in 2017, means that anybody entering the space can now make use of lending with easier terms with enhanced limits. [4]

 

At the same time, a large part of the sector remains unorganised with fragmented warehousing and lack of seamless movement of goods across modes. In order to develop the sector in a cohesive way, it is important to focus on new technology, improved investment, skill-development, removing bottlenecks, improving inter modal transportation, automation, and simplifying processes.

By bringing in cloud-based GPS tracking systems and transparent pricing along with other amazing technologies designed to improve the logistics sector, we can help to ensure the sector witnesses double-fold growth in the coming years. The intention is to devise the most cost-effective and reliable method to transport goods. Technology helps condense the supply chain of an industry by reducing the waste of time and resources, bringing in efficiency for last-mile delivery scheduling.

Quick, safe and timely delivery is a pressing priority for most of our clients and if you can cater to this, you will be gaining long term business. With mobile data costs falling by 95 percentage since 2013, India will see internet users rise by about 40 per cent and the number of smartphones will double by 2023 [5] For any newcomer to the market, the value proposition has to be in providing the technology needed for people to easily move items valuable to them and for drivers to make a flexible income leading to an increased standard of living.

Going forward, strategic investment and operational excellence are going to be crucial for the logistics industry in India. If the cards are played right by anyone entering the sector, it has the potential to create a huge number of jobs and play a key role in driving the economy forward.

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Alan Tsang

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