India logistics sector for Sustainable Growth and Competitiveness Introduction 

• India’s logistics sector is currently at a crucial turning point, with technological disruptions, infrastructure improvements, sustainability goals, and strategic policy initiatives paving the way for significant transformations. 
• Despite the country’s potential, logistics costs in India are estimated to account for 14-18% of GDP (Economic Survey 2022–23), far exceeding the global benchmark of 8%. This inefficiency has a significant impact on India’s global competitiveness. However, recent developments such as PM Gati Shakti, private equity inflows, and green transformation initiatives signal a paradigm shift for the sector.
• As India envisions a “Viksit Bharat @2047”, an efficient and sustainable logistics network will be integral to inclusive development, green growth, and boosting economic competitiveness. Logistics today is about more than just the movement of goods; it’s about connectivity, cost-efficiency, environmental resilience, and scalability.

What is India’s Logistics Sector and Its Contribution?

• • India’s logistics sector covers transportation (road, rail, air, and waterways), warehousing, supply chain management, and related value-added services that facilitate the movement of goods across the country.

• Key Statistics:

• • Contribution to GDP: The logistics sector contributes approximately 13-14% of India’s GDP (NCAER, 2021-22).
  • Employment: The sector provides employment to over 22 million people across transportation, warehousing, packaging, and related services (CII Report, 2024).
  • Logistics Costs: India’s logistics costs account for 14-18% of GDP, significantly higher than the global average of 8-10%.
  • Private Equity Investments: In H1 2024, 66% of total private equity investments were directed towards logistics, including a $1.54 billion investment in Reliance Logistics by the Abu Dhabi Investment Authority & KKR.
  • Warehousing Absorption: Warehousing absorption saw 25% YoY growth in 2024.
  • Carbon Emissions: Logistics is responsible for about 13.5% of India’s greenhouse gas emissions, with road freight contributing to ~88% of the sector’s emissions (IEA, 2023).
  • Third-Party Logistics (3PL): The rise of 3PL services has been driven by the rapid growth of e-commerce, Q-commerce, and manufacturing.

Strategic Importance of India’s Logistics Sector

• Infrastructure Development & Urbanization: India’s major logistics hubs like Chennai, Mumbai, Pune, and the National Capital Region (NCR) are undergoing major upgrades with multi-modal logistics parks. Additionally, Tier 2 and Tier 3 cities, including Patna, Coimbatore, and Lucknow, are emerging as key locations for cold storage and warehousing. These cities are enhancing accessibility and logistics efficiency across India.

• Employment and Skilling: The logistics sector is a major employer, providing jobs to over 22 million people. The 2025 Budget includes a proposal to establish 5 National Centres of Excellence for skilling in logistics and warehousing, further promoting employment and professional development in this vital sector.

• Environmental and Climate Significance: The logistics sector is among the most carbon-intensive industries. As part of India’s commitment to achieving Net Zero by 2070, decarbonizing logistics is essential. The sector’s emissions stem from inefficient modal mixes, road freight, and oil-based transport systems. The transition to sustainable logistics is pivotal for meeting climate change goals and ensuring long-term growth.

• Support for Key Sectors: Logistics is crucial for Make in India, Atmanirbhar Bharat, and other growth initiatives. By improving farm-to-fork cold chains, and strengthening manufacturing and e-commerce supply chains, logistics plays an indispensable role in India’s self-reliance and industrial growth.

• National Development and Inclusivity: A well-functioning logistics network enhances rural connectivity, ensures MSME market access, and promotes employment in underserved regions. This is critical for inclusive growth, which forms the backbone of Viksit Bharat by 2047.

• Geopolitical and Strategic Relevance:  India’s logistics infrastructure, including projects like the Delhi–Mumbai Industrial Corridor and Sagarmala, strengthens its geopolitical position. By enhancing trade routes, improving supply chain resilience, and enhancing national security, efficient logistics will reinforce India’s strategic leverage in the global economy.

• Economic Growth and Competitiveness: Reducing logistics costs is directly linked to enhanced economic performance. According to McKinsey, a 1% reduction in logistics costs could save the Indian economy $15 billion. Efficient logistics is central to several national initiatives, including Make in India, Ease of Doing Business, and improving Export Competitiveness. It supports vital sectors such as manufacturing, agriculture, pharmaceuticals, and FMCG.

Key Government Initiatives for the Development of the Logistics Sector

• Multi-modal Logistics Parks (MMLPs): Under the Public-Private Partnership (PPP) model, over 35 Multi-modal Logistics Parks (MMLPs) are planned to integrate road, rail, air, and waterways logistics. These parks are designed to reduce transit time, alleviate congestion, and minimize environmental impact.

• Sustainable and Green Freight Initiatives: The government is testing electric highways like the Delhi–Jaipur corridor to reduce carbon emissions in freight transport. Additionally, solar-powered warehouses and electric vehicles (EVs) for last-mile delivery are being promoted, alongside the use of biofuels, hydrogen, ammonia-powered ships, and LNG vessels.

• Skilling Initiatives: The 2025 Budget includes provisions for setting up 5 National Centres of Excellence for Skilling in logistics. Public-private partnerships are driving logistics skilling in Tier 2 and Tier 3 cities, ensuring an industry-ready workforce.

• Sagarmala and Bharatmala Projects: The Sagarmala and Bharatmala projects are designed to improve coastal and port connectivity and develop road freight corridors. These projects are expected to reduce transit time and logistics costs by up to 25%.

• Dedicated Freight Corridors (DFCs): The construction of Western DFC (Delhi–Mumbai) and Eastern DFC (Punjab–West Bengal) is a major step in shifting freight from roads to rail, which will reduce congestion and improve efficiency.

• Inland Waterways Development: The government plans to triple cargo movement on rivers by 2030 under the Jal Marg Vikas Project, which will enhance the efficiency of inland water transport, especially along the Ganga and Brahmaputra rivers.

• PM Gati Shakti – National Master Plan (2021): The PM Gati Shakti National Master Plan is a GIS-based platform aimed at integrated infrastructure planning. By enabling faster approvals, reducing duplication of efforts, and facilitating coordinated inter-ministerial planning, this initiative plays a crucial role in driving logistical efficiency. In Budget 2025, the government made the PM Gati Shakti data/maps accessible to the private sector for better project planning.

• National Logistics Policy (NLP), 2022: The National Logistics Policy was introduced to reduce logistics costs to a single-digit GDP percentage. The policy focuses on enhancing multi-modal transport, creating digital logistics platforms, boosting skilling initiatives, and promoting green logistics practices.

Emerging Trends in India’s Logistics Sector (2025 and Beyond)

• Digital Twins: Real-time virtual models for warehouse simulation and optimization are gaining traction, improving operational efficiency.

• Q-commerce Boom: With the increasing demand for faster last-mile delivery, in-city fulfilment centres are growing, marking a significant shift towards quicker consumer deliveries.

• Cold Chain Expansion: As sectors like food, pharma, and retail grow, there is a noticeable expansion in Grade A cold storage facilities, especially in Tier 2 and Tier 3 cities.

• Tech Integration: Technologies like IoT for real-time tracking, robotics, and blockchain for inventory management and warehouse operations are expected to streamline logistics functions.

• Sustainability: The adoption of electric vehicle fleets, solar power, and circular economy practices in packaging and supply chains is expected to grow, driving a more sustainable logistics industry.

• Diversity and Inclusion: There is a growing trend toward increasing female participation in supply chain roles, ensuring diversity in a traditionally male-dominated industry.

Challenges Facing India’s Logistics Sector

• Fragmented Sector: The logistics sector is fragmented, with small, unorganized players lacking access to technology and standardization. Over 90% of trucks are individually owned, leading to inefficiencies and low adoption of technology-based logistics solutions among SMEs.

• Poor Modal Balance: India’s logistics sector is heavily skewed toward road transport, with railways and inland waterways underutilized. The lack of development in coastal shipping and inland water transport poses a barrier to efficient, cost-effective logistics.

• Inadequate Cold Chain Infrastructure: Cold chain logistics remains underdeveloped, particularly in Tier 2 and Tier 3 cities. This gap affects sectors like food security, pharmaceuticals, and exports.

• Workforce Skill Deficit: There is a shortage of skilled labor in logistics, particularly in supply chain management, cold chain operations, and technology integration, impacting the sector’s overall efficiency.

• High Logistics Costs: Logistics costs in India range from 7.8%–8.9% of GDP, significantly higher than the global average of 8%. This is primarily due to supply chain inefficiencies and unfavorable intermodal mix.

• Carbon Emissions and Environmental Degradation: The logistics sector is a significant contributor to greenhouse gas emissions, particularly from road freight, which accounts for 38% of CO₂ emissions. Additionally, warehousing infrastructure contributes significantly to energy consumption.

Way Forward

• Integrated Tech-Driven Logistics: The expansion of the Unified Logistics Interface Platform (ULIP) and the integration of IoT, blockchain, and GPS tracking will help streamline operations, reduce inefficiencies, and enhance logistics management.

• Cold Chain Modernization: To ensure food security, pharmaceutical storage, and better exports, India must focus on modernizing cold chain infrastructure, especially in Tier 2 and Tier 3 cities.

• Skill Development and Gender Inclusion: The government should focus on expanding logistics training programs and creating logistics universities. Gender inclusivity in the workforce should be promoted, with a focus on women’s participation in supply chain roles.

• Private Investment and PPPs: India should continue attracting private equity investments, as seen with the KKR-ADIA investment. Encouraging public-private partnerships (PPPs) for developing logistics parks and green warehousing will drive growth.

• Policy and Regulatory Reforms: A Unified National Logistics Regulatory Framework should be created to improve inter-ministerial coordination. Additionally, the government should leverage the Logistics Performance Index (LPI) to identify areas for improvement.

• Global Best Practices: India can adapt global best practices such as China’s rail freight model, USA’s rail decarbonization strategies, and Germany’s vocational training system. These models can be customized for India’s diverse geography and logistics needs.

• Modal Shift to Railways and Inland Waterways: To reduce road freight dominance, India needs to increase rail freight share from 27% to 45% by 2030 (NITI Aayog). Coastal shipping and inland waterways should also be promoted as cost-effective and environmentally friendly alternatives.

• Green Infrastructure: India must adopt solar, wind, and geothermal energy in logistics operations and roll out electric and LNG-powered vehicles for freight transport and urban logistics to reduce carbon emissions.