by Anushree Ghosh
Analysis of the logistics industry for 2019
Current scenario of the Indian Logistics industry, government initiatives to organise the sector, the warehousing space of India, future growth and trends
The Indian logistics industry has recorded a tremendous growth rate in the past few years. According to the latest report from Investment Information and Credit Rating Agency (ICRA), the logistics sector would expand magnificently at the rate of 8-10 %, better than what was observed in the last five years. The Logistics Performance Index lists India in the 44th position with an LPI score of 3.18 as per the 2018 rankings. The three major segments of the Indian logistics segment include third-party logistics, cold chain and e-commerce. With the flourishing online businesses, everyone assumed that the storehouses could be safely put to rest; not realising that the ordered goods have to be physically stored somewhere to be delivered when expected. Therefore, this positively affected the warehousing businesses in India—which is primarily managed by the third-parties.
Although growing with the digital era, the logistics sector in India remains largely unorganised with local players occupying a large share of the total industry. The ‘instant coffee’ pace of delivery expected by the customers has further pushed the growth of this industry, and we anticipate further expansion in the coming years. The new government policies also seem to favour this industry— the infrastructure status to the sector and implementation of GST. Also, vision-oriented programmes such as Bharatmala Pariyojana, UDAN and Sagar Mala project scheme will provide a push to the logistics industry.
According to Commercial Real Estate’s (CBRE) report, metropolitan cities like Bangalore, Delhi and Mumbai dominated the warehousing space, with the other cities like Hyderabad, Kolkata and Pune collectively claiming the rest of it. The market is also expected to witness an increase in the automation of the warehouses that are meant to improve and streamline the processes and minimize human intervention. Due to its futuristic applications, investors are largely trying to make investments in the hope of a greater rate of interest. The warehouse automation market in India is anticipated to grow by 12% by the year 2020.
Introduction of The E-Way bill last year is presumed to bring transparency in the sector which could lead to more Foreign Direct Investments in the coming years. These reforms are likely to stabilise the unnecessary expenses in the system.
According to the report published by ‘Money Control’ on May 09, 2018:-
“CRISIL report suggests that the Indian logistics industry that was estimated at Rs 6.4 trillion in FY17 is forecasted to reach Rs 9.2 trillion by FY20 representing a CAGR of 13% driven by growth across all segments and the 3PL market in India stood at Rs 32,500-33,500 crore in FY17 and is expected to grow at a CAGR of 19-21% to reach Rs 57,000-58,000 crore by FY20.”
In 2019, government initiatives and increased transparency will play a vital role in shaping the industry. If everything goes as planned, this sector has huge potential and will generate many jobs.