Infrastructure investments propel India’s logistics costs below 9% of GDP; goes past USA and Germany in cargo dwell time

India’s logistical landscape has undergone a significant transformation, heralding promising prospects for the nation’s economic advancement. A recent report commissioned by the federal government highlighted a notable achievement: logistics costs have plummeted to below 9% of the gross domestic product (GDP). This substantial decline, attributed to amplified state investments in infrastructure, port advancements, and digital integration, holds the potential to fuel a manufacturing renaissance.

Rajesh Kumar Singh, Secretary at the Department for Promotion of Industry and Internal Trade (DPIIT) lauded this development as a pivotal milestone during the report’s launch. He emphasized the substantial reduction in logistics costs for both domestic producers and exporters. Singh stressed that India’s logistics expenses are now on par with several Western economies—a testament to the nation’s persistent efforts. The government aims to further enhance infrastructure by bolstering investments, both from state coffers and private entities.

Logistics Cost in India 

The comprehensive report titled “Logistics Cost in India,” crafted by the National Council of Applied Economic Research, delineated the factors contributing to this remarkable shift. It highlighted that costs covering transportation, warehousing, insurance, and administrative charges have substantially decreased. The improvements in the road network, tax reforms, and the digitalisation of supply chains were identified as key drivers. Logistics costs, which were previously between 8.8% to 10% of GDP in 2012-13, have now scaled down to a range of 7.8% to 8.9% of GDP in 2021-22, as per Poonam Munjal, the lead author of the report.

India Climbs in World Bank’s Logistics Index 

India’s ascent in the World Bank’s Logistics Performance Index is a testament to its remarkable progress. Climbing six places to secure the 38th position out of 139 countries in 2023, the country showcased marked enhancements in road and port networks alongside a seamless integration of supply chains through digitisation.

India’s Truck Cargo Dwell Time Beats US and Germany 

Highlighting the efficiency of India’s logistical operations, the World Bank reported an average dwell time for truck cargo at ports to be merely 3 days. Comparatively, the United States and Germany registered 7 days and 10 days, respectively. Prime Minister Modi’s administration has dedicated substantial funds, over Rs 10 trillion, toward infrastructure development in the ongoing fiscal year, a substantial increase from the preceding year.

Looking ahead, Singh emphasised India’s ambition to further elevate its global logistics ranking, aiming to break into the top 25 countries worldwide. This ambition reflects the nation’s steadfast commitment to optimising its logistical capabilities for sustained economic growth and enhanced global competitiveness.

India’s successful endeavour to curtail logistics costs signifies a paradigm shift, auguring well for the nation’s economic resurgence. The convergence of improved infrastructure, digitisation, and strategic investments sets the stage for India’s emergence as a logistics powerhouse on the global stage, fostering a conducive environment for heightened manufacturing prowess and economic prosperity.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.