What makes India a lucrative market for a logistics player?

By : |December 5, 2019 0

In the last few years, India has emerged as one of the fastest-growing large economy of the world. It has now become one of the top global destinations for Foreign Direct Investment. In consequence of globalization and digitalization, the logistics sector is expected to grow at a CAGR of 12.17% by 2020.

Increased economic activity as well as changing consumer expectations will drive more businesses towards using express delivery services. With the rise of e-com in the last decade, customers today want goods delivered as fast as possible. Companies, on the other hand, will require managing their supply chain and product distribution to be more time-specific & efficient.

On-demand logistics companies, relentless in their quest for competence and time-optimal operations, will lead the charge in improving how goods in India move from one point to the other.

As the country gears up for double-digit growth in GDP and breaks into USD 5 trillion club by 2025, the focus is significantly on boosting manufacturing, which will require increased transportation of raw materials to centres of production along with delivering manufactured goods to end customers.

With rural areas agglomerating to form tier 2 and tier 3 cities, it is also estimated that roughly 300 million Indians will live in these cities by 2025. With growing disposable incomes and higher aspirations, these billion-plus Indians are projected to spend an astonishing USD 104 billion just on FMCG products alone.

Bringing these products to the markets or their homes will require new supply chains and marketplace and the logistics industry will be relied upon to bridge this gap.

On average, logistics account for anywhere between 8% and 20% of a country’s Gross Domestic Product (GDP). India’s logistics cost represents 14% of GDP and the country is aiming to reduce to less than 10% of GDP By 2022. Reduction in logistics cost will lend a competitive advantage to Indian exports and will result in ease of production.

With the implementation of GST, there have been monumental changes in the sector as it has become one big market with fewer and bigger warehouses. It will result in greater adoption of a hub and spoke model in segments such as warehousing, container freight stations, cold chain, and inland container depots. It will bring in scale to logistics companies as there will be an increase in savings, stoppage of wastage and lesser delays. This will lead to greater economies of scale for transport operators and lead to more companies outsourcing their logistics operations.

Consistent improvement in transport facilitation and with the government’s grant of infrastructure status to the sector in 2017, anybody entering the space can now avail lending at easier terms with enhanced limits. This only proves that the sun is shining bright for the sector.

At the same time, a large part of the sector remains unorganised with fragmented warehousing and lack of seamless movement of goods across modes. In order to develop the sector in a cohesive way, it is important to focus on new technology, improved investment, skilling, removing bottlenecks, improving inter modal transportation, automation, and simplifying processes.

If we bring in cloud-based GPS tracking systems and transparent pricing along with other amazing technologies in line with the logistics work, it will help ensure to grow the sector double-folds in the coming years. Technology will help condense the supply chain of an industry by reducing waste of time and resources, bringing in efficiency for last-mile delivery scheduling.

Quick, safe and timely delivery is a pressing priority for most of the clients and if you can cater this to your clients, he is giving you business forever. With mobile data costs falling by 95 per cent since 2013, India will see internet users rise by about 40 per cent and number of smartphones to double by 2023 [5] For any entrant in the market, the value proposition has to be able to provide the technology needed for people to easily move items valuable to them and for drivers to make a flexible income along with an increased standard of living.

Going forward, strategic investment and operational excellence are going to be crucial for the logistics industry in India. If the cards are played right by anyone entering the sector, it has the potential to create a huge number of jobs for the nationals and play a key role in driving the economy on a high wave.

By Alan Tsang, Director, Lalamove India

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