Budget 2023: Vision for India’s logistics future decoded

The latest Indian Budget has brought some cheer to the supply chain industry in India. Boosting the capital investment outlay by 33% to Rs. 10 lakh crores in the Union Budget 2023-24, with a focus on infrastructure, will surely fortify India's place in the global supply chain.

This is an excellent move towards India's goal of becoming a $ 5 trillion economy by 2025, since the logistics industry is an essential part of our country's economy, employing 22 million people. The budget had multiple key highlights that point towards government's firm resolve to push logistics industry and support it to become globally competitive.

  • A 75% hike in allocation for Dedicated Freight Corridor Corporation of India (DFCC) as compared to last year.
  • Prioritization of 100 crucial transport infrastructure projects.
  • Simplify taxes, reduce compliance, and create infrastructure Finance Secretariat.
  • Investment in digitization and automation to develop smart warehousing.
  • Strong emphasis on green and sustainable practices with the aim of achieving net zero carbon emission by 2070.
  • Focus on improving first and last mile delivery.

These are great initial steps and continuing this momentum and support will go a long way in improving India’s positioning in the global logistics performance index. Currently, India ranks at a dismal 44th rank in the Logistics Performance Index (LPI).

The logistics industry is growing at a healthy rate with a projected CAGR of 15.5%. The other initiatives by the Government of India, including Make in India and the growth of e-commerce through Digital India, will be reliant on excellent logistics service to be successful.

The biggest hindrance in India’s global trade costs is the high logistics cost. While the global average is around 8% India’s logistics costs hover around 12-13% of GDP rate. There were three major initiatives and announcements done in the past, and the Union Budget seems to focus on successful implementation of those.

NLP – National Logistics Policy – The overarching principle of launching the National Logistics Policy is to enhance economic growth, increase employment and improve the competitiveness of domestic products in local and global markets. It will provide a single window-e-logistics market, promoting seamless movement of goods across the country.

Gati Shakti - Gati Shakti seeks to improve the first and last mile delivery, which is a major roadblock for MSME’s and e-commerce startup’s across India.

ULIP - Unified Logistics Interface Program aims to create a technology backed framework that can help unify the communication between various stakeholders. It will help improve visibility, cut down delays and transport costs and enhance efficiency, providing greater reliability and ease of doing business.

As a freight forwarder, we believe that there are a few things that the government and industry should focus on going forward to support and propel logistics growth further in India.

Better Warehousing

Indian warehousing sector has seen an increase in the CAGR rate of around 15%. The institutional investment in the sector too has seen an increase, however there are a couple of problems that are hampering the quick growth of warehousing. Finding and acquiring land that is easily accessible is proving to be difficult, with various state laws complicating it further.

Cold storage Infrastructure

There is a need for reliable and strong cold storage infrastructure. Right from warehousing to transport to containers and everything in between needs a major impetus. With the growth of quick commerce, pharmaceuticals and consumables, this is one sector that needs to be world class. Apart from the infrastructure, there is a need for skilling the ancillary industries as well.

Dedicated Freight Corridors

With nearly 60% of Indian goods being transported by road, it is important that we reduce this time and make it a safe option. Investing and developing dedicated freight corridors will cut down the transport time, make it safe and well equipped with the services and facilities necessary for drivers and cleaners.

New Age Technology in Supply Chain

Logistics industry has been a slow mover when it comes to accepting and implementing new age technology, however with the digital push, global changes in the logistics industry and the government’s push for ULIP, it is time for logistics industry to implement new age technology to be competitive at the global level.

Skill Training

Skill development in the areas of warehouse management, handling equipment and cargo, monitoring cold storage, driving, handling compliance, implementing new age technology in logistics and managing transport hubs will go a long way in developing an efficient system across the country.

We believe the logistics outlook is positive and growth oriented. As an industry, it is time to seize the opportunities, voice our needs in a more unified way and focus on making Indian logistics as one of the most competitive global industries.