The Indian logistics market is currently valued at Rs 9 trillion and is projected to grow significantly to reach Rs 13.4 trillion by FY28. This growth is being driven by structural shifts, technological advancements, and government initiatives aimed at reducing logistics costs and improving infrastructure. The National Logistics Policy, introduced in September 2022, has set ambitious goals to optimize India’s logistics landscape by increasing the share of railways in freight movement and improving road infrastructure and inland waterways. The commissioning of dedicated freight corridors (DFCs) is expected to enhance the capacity and efficiency of rail freight, thereby increasing its overall share in the modal mix.
One of the major contributors to the high logistics costs in India, currently standing at 14 percent of GDP, is the skewed modal mix with roads dominating 71 percent of freight movement. To address these inefficiencies, the government has implemented key initiatives such as the Goods and Services Tax (GST) and invested heavily in road infrastructure, inland waterways, and dedicated freight corridors. These measures are expected to reduce the logistics cost-to-GDP ratio to 8-9 percent in the near future, aligning India with global standards.
The Indian logistics market is highly diverse, encompassing various segments such as road transport, rail transport, air cargo, multimodal logistics, and industrial warehousing. The domestic express logistics segment is expected to experience robust growth with a projected 14 percent compound annual growth rate (CAGR) over the period of FY23-28, primarily driven by the expansion of e-commerce. Organized players, who already hold about 80 percent of the market share, are likely to strengthen their position by leveraging government policies like the e-way bill and GST. The less-than-truckload (LTL) segment in road transportation is also expected to witness significant growth, fueled by the increased demand for smaller and more frequent shipments, bypassing warehouse storage, and reaching retailers directly.
Furthermore, the government’s push for port privatization has led to improved infrastructure and efficiency at Indian ports, benefiting major operators such as Adani Ports and SEZ (APSEZ) and JSW Infrastructure. The commissioning of DFCs, which are 96 percent complete as of April 2024, is set to enhance rail freight capacity and efficiency. By increasing the share of railways in freight movement, reducing logistics costs, and improving infrastructure, India aims to align itself with global logistics standards and boost the overall growth of the sector.
In conclusion, the Indian logistics market is poised for significant growth in the coming years, driven by structural shifts, technological advancements, and government initiatives. The implementation of key policies like the National Logistics Policy, GST, and investments in infrastructure are expected to reduce logistics costs and improve efficiency. With a projected CAGR of 8-9 percent, the Indian logistics market is set to reach Rs 13.4 trillion by FY28, positioning itself as a key player in the global logistics landscape.
