Mains Practice Questions

Approach:

• Introduce the answer by briefing about Logistics sector in India
• Give arguments to Logistics as the Backbone of Economic Efficiency
• Highlight Transformational Growth Trends in India’s Logistics Sector
• Delve into Persisting Challenges in India’s Logistics Sector and Suggest Transformational Reforms
• Conclude suitably.

Introduction

Logistics, encompassing transportation, warehousing, and supply chain management, plays a pivotal role in enabling economic growth by ensuring the smooth movement of goods and services.

• In India, the logistics sector contributes around 13-14% of the GDP, a figure higher than global benchmarks (~8%), indicating both its importance and inefficiencies.

Body:

Logistics as the Backbone of Economic Efficiency:

• Enabling Supply Chain Resilience: Logistics ensures time-sensitive delivery of goods, critical for sectors like pharmaceuticals, agriculture, and e-commerce.
  • Efficient cold chains reduce post-harvest losses (~₹92,000 crore annually), enhancing food security.
• Supporting Manufacturing and Exports: With the PLI schemes and ‘Make in India’, manufacturing-led growth requires robust end-to-end logistics.
  • For instance, India's merchandise exports reached $447.46 billion in 2022–23, heavily reliant on efficient port and multimodal connectivity.
• Driving Employment and Formalisation: The sector employs 22 million people, expected to add 10 million more jobs by 2027.
  • Formalisation through policies like GST and National Logistics Policy enhances productivity and workforce skills.
• Enabling Regional and Global Connectivity: Initiatives like India-Middle East-Europe Corridor (IMEC) and Sagarmala improve trade linkages and maritime efficiency.

Transformational Growth Trends in India’s Logistics Sector:

• Robust Market Expansion: The sector grew at 11% CAGR (2019–24) and is projected to reach ₹35.3 trillion by 2029.
• Policy Support and Government Interventions: National Logistics Policy (NLP) aims to reduce logistics cost to 8% of GDP by 2030.
  • PM Gati Shakti Master Plan integrates 1400+ data layers to improve multimodal infrastructure planning.
• Infrastructure and Modal Shift: Dedicated Freight Corridors (DFCs), 35 multimodal parks under Bharatmala, and improved port connectivity are reshaping the modal mix.
  • Modal shift from roads to rail, coastal, and inland waterways is critical for cost efficiency.
• Digital Transformation: Platforms like ULIP, e-Sanchit, and tools like FASTag, IoT, and AI-based route optimization are streamlining logistics.
  • India improved 6 places to 38^th in the World Bank’s Logistics Performance Index (2023).
• Rise of E-commerce and Last-Mile Logistics: E-commerce projected to reach $200 billion by 2026, with logistics companies like Delhivery driving last-mile efficiency.
  • Tech-enabled micro-warehousing and reverse logistics are expanding in Tier-II/III cities.

Persisting Challenges in India’s Logistics Sector:

Transformational Reforms to Enhance Efficiency:

• Integrated Infrastructure Development: Fast-track DFCs, multimodal logistics parks, and last-mile rural connectivity.
  • Emulate models like Mumbai Trans Harbour Link, improving access to Jawaharlal Nehru Port.
• Regulatory Simplification and Single-Window Clearance: Expand e-Sanchit to all logistics-related processes.
  • Harmonise state regulations and enable faceless customs clearance.
• Digitisation and Technology Incentives: Promote tech adoption in MSMEs through subsidies and access to ULIP APIs.
  • Develop India-specific logistics innovations in partnership with startups.
• Skill Development and Certification: Partner with e-commerce giants for last-mile skilling programs.
  • Establish logistics-specific ITIs and certification standards.
• Green Logistics Push: Launch Green Logistics Certification Program. Promote EV adoption, coastal shipping, and low-carbon corridors (e.g., Sagar Sethu).
• Multimodal Integration and Freight Rationalisation: Implement multimodal hubs at economic clusters.
  • Offer incentives to shift cargo from roads to railways and inland waterways.

Conclusion:

The National Logistics Policy (NLP) marks a transformative shift in India's approach to logistics by aiming to reduce logistics costs to 8% of GDP, enhance multimodal integration, and improve global competitiveness. With effective implementation, it can become a key enabler of India's transition from a developing to a developed economy, driving economic efficiency, export growth, and inclusive development.