Reduced logistics costs key to lifting India's economy

According to an ASSOCHAM-Resurgent India joint study, India can save up to about ₹3.25 lakh crore ($50 billion) if logistics costs are slashed from 14% to 9% of country's GDP, leading to more competitive global presence for its domestic goods.

"With expected inflow of new investments owing to government's thrust on promoting domestic manufacturing sector, India's cargo and logistics industry is likely to clock a CAGR of about 16% during the course of next few years," noted the study on 'Cargo and logistics industry in India,' conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with knowledge firm Resurgent India.

"The 'Make in India,' campaign will see investments connect India to global production networks that would generate new business for logistics in the country thereby making it an attractive location to do business as compared to other regions in the world," it said.

"Growth in logistics sector would imply improved service delivery and customer satisfaction thereby leading to growth in exports of Indian goods and potential to create job opportunities," the study said further.

However, the government needs to put in place requisite infrastructure to keep pace with development across the world. "This will help in bringing down the costs considerably, boost gross domestic product (GDP) and generate employment opportunities."

"Appropriate policy changes and opening up capacity together with increase in speed for transportation of goods and services through various modes, viz., rail, road, water and others is imperative for the growth of cargo and logistics industry in India," said D.S. Rawat, secretary general of ASSOCHAM.

"Transportation of bulk commodities through waterways can free up capacity for fast moving goods, besides, setting benchmarks and standards for industry will drive uniformity of warehouses, storage and transport equipment," added Rawat.

Access to cheap capital should be made available to logistics service providers for investments in infrastructure, enabling them to extend longer credit periods to their clients and supplementing their working capital, suggested the ASSOCHAM-Resurgent India study.

"The government should create a uniform tax structure and do away with multiple checkpoints and documentation requirements which would lead to speedier delivery of cargo," it said.

The study highlighted that passage of goods and services tax (GST) will further improve the logistics sector's performance by bringing down distribution costs by up to 15%.