According to the Investment Information and Credit Rating Agency (ICRA), the Indian logistics sector is growing and will continue to grow at a rate of 8-10%. This number shows that there is a significant improvement in compound annual growth rate (CAGR) which was 7.8% in the last five years. The growth in the logistics sector is a result of improvements in various other sectors like eCommerce, retail, manufacturing, transportation etc. The logistics sector is thriving in full swing due to the updated requirements of modern consumers and various firms, both small and large scale. The sector comprises of transportation via various mediums like rail, road, air and water. According to A.T.Kearney’s annual Global Retail Development Index (GRDI) of 2010, India is recognized as a very attractive investment destination among the 30 most profitable market sectors in the whole world.
In 2014, India ranked 54th position in the global market. but after two years in 2016, India showed a massive leap straight to 35th position. Keeping the potential of the logistics sector in mind, the Indian Government has included it in the list of “Harmonised Master List of Infrastructure Subsector”. Though the logistics sector holds great potential, still it is highly unorganized unlike the other domestic sectors like automotive, insurance, eCommerce etc. The unstructured logistics industry faces have faced several challenges in recent years. It has also grown significantly due to booming of several sectors like eCommerce, retail, Information Technology (IT) etc. Let us have a closer look at the labyrinthine flow of this sector.
Changing Consumer Demands
With a constant shift in the structure of consumer demands, the infrastructure of the logistics industry is being directly affected. Majority of the transportation occurs by rail or road, and a limited percentage occurs by sea. While the road transportations are carried by private and government logistics firms, the rail transportations are only through government channels. The road is preferred due to cost-effectiveness and flexibility, while the railway is preferred due to its convenient containerization.
With a boost of eCommerce in the recent market, the logistics firms are working hard to meet customer needs. When you are ordering a product on Amazon.in sitting in Delhi, you will find that the product delivery is coming from Hyderabad. Who will help you to get the product? The logistics firms are joining hands with the eCommerce sites to get more and more business. The robust growth witnessed by the Indian economy in this decade has lead to various new job opportunities. More and more people are relocating from their hometown in quest of a secured and profitable employment opportunity.
The city of Bangalore is aptly called the “Silicon Valley of India”. A major portion of working individuals is relocating to this city for a prospective future. Some other cities include Hyderabad, Chennai, Delhi, Gurugram, Mumbai etc. They are hiring various packers and movers agencies for transporting their essentials from one place to another. The pattern of consumer demands has contributed to the Logistics Revolution.
Digitization in the Logistics Sector
The wind of the Digital Revolution is sweeping the Indian logistics industry and supply chain towards an upward trajectory. With the dawn of this decade, the technological advances are doing wonders which are no less than a fairy tale. With campaigns like ‘Make in India’ and ‘Make India Digital’ the logistics sector has slowly begun its disruptive transformation. The CAGR is growing at an average rate of 16%, and it is expected to reach US$ 307 billion by 2020, according to a study conducted by The Associated Chambers of Commerce and Industry of India. Machine Learning and Data Analytics have helped in managing client expectations, augmenting growth and efficiency and enabling cost control.
Many tech-enabled and niche skilled logistics experts are using the Internet of Things (IoT) for improving supply chain management and generating revenue in the ongoing process. The sector is inducing more machine-to-machine interaction in warehousing management. This can avoid accidents and mishaps is one of the recent additions that the logistics sector is witnessing in this decade. The domestic logistics firms and companies are expanding their market globally, across several geographies and timeliness. The thriving logistics sector is using Blockchain technologies in maintaining records of all transactions across all the sectors of the market. Such automated processes help in reducing frauds and bottlenecks and optimising supply chain security. Artificial Intelligence (AI) is used for big data analysis and thus averting any kind of crisis or mismanagement.
Investment Opportunities in the Logistics Sector
The logistics sector plays a significant role in India’s economy by managing the transportation of goods from the point of origin to the point of consumption. According to a study conducted by J.P.Morgan, both ports and logistics firms are profitable in terms of investment options and brokerages. At the beginning of this decade, inadequate infrastructure and age-old technology pulled down the growth of the logistics sector. But by the closing of this decade, the scenario has changed. The logistics firms and the third party service providers are using modern-day technology and meeting the demands of the consumers, making the sector more profitable than ever.
The Indian logistics is gaining momentum, making the sector ripe for all kinds of investments. The Indian government has taken major steps in boosting the growth of the logistics industry. According to India Brand Equity Foundation (IBEF), “The commerce and industry ministry has decided to give one-time funding of Rs 8 million to the sector for building up initial infrastructure and phase-wise support of Rs 33.9 million for four years.” Implementation of GST and e-way bills will improve the efficiency of the logistics players. Several other steps are also taken in favour of the changes in the logistics sector, like constructing broader roads, improving the quality of national highways, trucks etc. The logistics sector has undergone significant growth in recent years, making it one of the most strategic investment options.
As of now, the logistics sector is 85% dominated by transportation shares and the rest 15% is due to the storage. In India, more than 22 million people are employed in the logistics sector, making it a suitable and prospective career option for many resources. Due to the presence of several unorganized players in the market, the sector is yet to reach its maximum potential. The government is trying very hard to reduce the cost which is 14.4% of India’s GDP at present and bring it down to 10% in the next four years. The initiatives and diverse investment options are making the sector highly competitive. The giant players like DTDC and Safexpress still hold their position strong in the domestic and global market. The inclusion of new players gives more options to consumers at competitive rates.
Conclusion
For maximising the growth, this industry is in constant search for expert professionals and veterans. Tech-enabled and niche skilled employable resources can bear the torch for the future logistics sector, making it more organized. The logistics industry, like any other industry, has and is undergoing major drifts in recent years, and the future holds great possibilities as well. The decade has created a historical tapestry on the logistics industry. With the increasing demand and fast technological advances, the logistics industry will not leave the centre stage anytime soon. The growth trajectory of the logistics sector cannot be depicted in one post.
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