Pathway to a 5 trillion economy and why logistic is a key driver
India has set an ambitious target of becoming a $5 trillion economy by 2027. The Indian Government’s five-year masterplan states that to achieve this vision, the government is implementing a series of transformative initiatives, including infrastructure upgrades, digital integration, and policy reforms.
While these initiatives are crucial, the logistics sector can play an equally vital role in achieving this vision. According to statistics, the logistics industry contributes 14% to India’s GDP and holds the potential to enhance economic efficiency and competitiveness.
Moreover, Experts predict that increasing efficiency in the logistics sector could reduce costs by 4-5% and can significantly enhance the global competitiveness of Indian products.
Recognizing this, the government is taking decisive steps— from Piyush Goyal’s announcement of a UPI-like system for logistics to significant allocations in the Union Budget 2025. In this blog post, we will explore India’s roadmap to becoming a $5 trillion economy and delve into why logistics is pivotal to realizing this vision. Read on to know more.
Government Initiatives and Budgetary Boost
The government’s efforts to overhaul the logistics sector are gaining momentum. Here are some impressive initiatives.
● PM Gati Shakti National Master Plan: -
this ambitious plan aims to integrate multimodal transport and cut transit times by 20-25%.
● Union Budget 2025: -
Union Budget 2025 is expecting a record allocation, including ₹3 lakh crore for railways to expand networks and add Vande Bharat trains. Furthermore, port upgrades and highway expansions will focus on improving last-mile connectivity.
● Piyush Goyal’s UPI-like logistics platform announcement: -
This announcement aims to simplify documentation and improve the movement of goods. This initiative is designed to optimize logistics operations across various states and focus on complementing the Unified Logistics Interface Platform (ULIP) for a seamless logistics ecosystem.
● Ease of Doing Business -
The National Logistics Policy (NLP) focuses on simplifying regulatory processes and lowering compliance burdens. As per stats, India has climbed 79 places, from 142nd in 2014 to 63rd in 2019, in the World Bank’s Ease of Doing Business rankings, reflecting notable progress in business reforms.
● Lowering Credit and Fuel Costs -
The government is working to reduce fuel costs through EV adoption and alternative fuels, while initiatives like the Credit Guarantee Fund Scheme help MSMEs access affordable financing, easing liquidity concerns.
● Nurturing and Growing Trade Partners -
Recently India has been doing business with the world by increasing varied trade partners and being a reliable partner in crises. Right from vaccine diplomacy to CEPA and IMEC to Chabahar Port, India is seeking to increase trade with the world.
Addressing Gaps in Logistics for MSMEs and Heavy Industries
While the government’s initiatives are commendable, certain gaps persist, especially for Micro, Small and Medium Enterprises (MSMEs) and heavy industries.
MSME Logistics Challenges
MSMEs often face high logistics costs due to their inability to achieve economies of scale. Moreover, limited access to advanced infrastructure and technology further exacerbates this issue and affects their competitiveness in domestic and global markets.
Heavy Industry Reliance on Roads
The logistics sector in India remains heavily reliant on road transport, which accounts for nearly 60% of freight movement. This over-dependence leads to increased costs, delays and a higher carbon footprint.
Digital Transformation: A Game-Changer
The proposed digital public infrastructure for logistics is a game-changer for the industry. This system will connect logistics providers, customers, and government agencies on a unified platform and help streamline operations. Moreover, real-time data sharing will optimize supply chains and minimize human error. Digital tools such as AI and IoT can further enhance predictive analytics, route optimization and inventory management.
Such innovations align with global best practices and can position India as a leader in logistics efficiency.
The Path Forward
To overcome these challenges, a comprehensive strategy is required:
● Infrastructure Development:
Infrastructure development such as continued investment in multimodal logistics parks, dedicated freight corridors, and port modernization can play a crucial role in enhancing efficiency and reducing costs.
● Digitization:
Next, implementing digital solutions such as single window clearance, proposed logistics UPI and automation tools can streamline operations, reduce paperwork, and improve transparency.
● Policy Support:
Simplifying regulatory frameworks and providing incentives for the adoption of green technologies can encourage innovation and sustainability in the logistics sector.
● Support for MSMEs:
last but not least, supporting MSMEs with access to shared logistics services and infrastructure can help them achieve economies of scale and improve their competitiveness.
Conclusion
In conclusion, logistics is the lifeblood of India’s economy. With ambitious initiatives like PM Gati Shakti, ULIP, and significant budgetary allocations, the government is paving the way for a $5 trillion economy. However, bridging the gaps for MSMEs and heavy industries, and leveraging digital transformation, will be critical to achieving this vision.