Closing The Logistics Loop

India is rapidly transforming its logistics ecosystem to meet the standards set by mature markets, such as the European Union and the United States.

- Ashish Bhatia

Historically, logistics costs in India were estimated to be -14-16 per cent of the country’s GDP, significantly higher than the five to six per cent typically seen in advanced economies. However, research from NCAER (commissioned by DPIIT and peer-reviewed by the World Bank) places the figure at 7.8-8.9 per cent of GDP for FY2021-22, aligning closely with government targets of sub-nine per cent by 2027-28. Policy initiatives, infrastructure investments, and industry-led modernisation drive this shift.

To contextualise this change, another metric stands out. India’s average road transport cost is an estimated Rs. 1.90 per tonne-km, nearly double that of the US and EU (Rs. 0.90-1.00), pointing to structural inefficiencies in utilisation, modal mix, and infrastructure. Bridging this gap requires a strategic focus on surface-transport-enabled integration that enhances efficiency from the first mile to the last mile, benefitting manufacturers, OEMs, fleet operators, and policymakers alike.

GLOBAL BENCHMARKS VS. INDIA’S LOGISTICS COSTS

Global logistics systems, rooted in multimodal integration using road, rail, water, and air efficiently, achieve costs as low as five to six per cent of GDP. According to the Journal of Logistics Management (2022), Europe’s logistics efficiency is driven by consolidated trailers, modal shift incentives, and mechanised operations. Surface Transport in the 3-Mile Framework. The name United Parcel Service (UPS), one of the world’s largest package delivery and supply chain management companies and a global giant comes to mind. UPS has partnered with InterGlobe Enterprises (which also owns IndiGo airlines) to create MOVIN, a new logistics brand focused on the Indian market.

INDIA'S SCENARIO (NCAER)

■ 2021-22 logistics costs: 7.8–8.9% of GDP.

■ Road freight costs: Rs. 1.90 per tonne-km vs. Rs. 0.90–1.00 abroad.