ISSUE NO.

1 | 5TH JULY 2021

WHAT'S MY VIEW
Official publication of BLASH, IIFT DELHI

Indian Logistics Industry - This series is exclusive on

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Failing our Foreign Trade?

WRITTEN BY SIDDHARTH AGGARWAL What's happening at
BLASH IIFT Delhi ?

The logistics industry is considered a crucial sector to boost

international trade as the quality and efficiency of logistics services Follow our weekly posts :
The Voyager & Ship-O-
can matter for international trade as a weak logistics infrastructure
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and operational processes can be a major obstacle to global trade
integration. India’s merchandise and manufacturing exports are
rapidly losing competitiveness primarily because of a poor logistics
infrastructure.
Issues faced in the Indian logistics sector are bad road conditions,
poor connectivity, inadequate air and seaport capacities and lack of
development of modes of transports like railways and alternates
like inland water transport and domestic aviation have been
constant irritants. These infrastructural bottlenecks make our
logistics costs per transaction very much high compared to those in
the developed markets. In India, the logistics cost as a percentage
of its GDP stands at 14% while, the similar cost in the US (9.5%),
Germany (8%) and Japan (11%).

Why logistics plays such a critical role in trade arises from the fact that they are the ones that give
last-mile delivery helps to an end customer or inland container depots (ICDs), container freight
stations (CFSs), ports or airports. Our country's vast and varied topography already makes the last
mile delivery a challenge. But, the fact that a large number of the country's industrial clusters
(dominated mainly by MSMEs) are based out of its tier 2 cities and not in its large metros, the last
mile connect is vital for the growth of Indian MSMEs.
Indian logistics landscape depends heavily (about 60%) on the congested Indian roads while The
Indian coastline and river network remains underused. Deloitte-Assocham study notes “that the
cost for coastal shipping is Rs 0.15-0.2 per tonne-km compared to Rs 1.5 for railways and Rs
2.5 for the road. Addressing these anomalies could alone provide a huge potential to lower
logistics cost in the economy by Rs 21,000-27,000 crore by 2025”
 ISSUE NO. 1 | 5TH JULY 2021

Source: World Bank Logistics Performance Index 2018

According to the logistics performance index (LPI), which is a weighted average of the score on the 6
key dimensions, India lags behind most nations in Asia

The key thing to note is that the Chinese logistics landscape was once like India's, but China now has
developed a massive last-mile delivery network with a well-balanced mode with waterways, roadways,
and railways. Also, Chinese's adoption of technology-enabled processes, logistics aggregators and
investment in drones, AGVs (Automated Ground Vehicles) has taken last-mile logistics several notches
above.

Considering the critical role of logistics in propelling India's exports, the Federation of Indian
Export Organisations (FIEO) believes a reduction in logistics cost by 10% could increase the
country's exports by about 5-8%. Thus, National Logistics Policy (NLP) is the step in the right
direction to develop a multi-modal infrastructure, the policy envisages optimising the current modal
mix (road-60%,rail-31%,waterways-9%) to bring them at par with international benchmarks
(road--25-30%, railways--50-55%, waterways--20-25%). The aim is to tackle last-mile woes, by
leveraging India's capabilities in technologies such as cloud computing, blockchain technology, IoT.

Siddharth Agrawal is a student

of IIFT Delhi and currently acts
as a Senior Club Coordinator
for OpSigma - The Operations
Club at IIFT Delhi

https://www.linkedin.com/in/siddharth-agrawal-9b5011145/