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India Freight and Logistics Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

India Freight and Logistics Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

  • December 2021
  • 425 pages
  • ID: 6192760
  • Format: PDF
  • Mordor Intelligence LLP


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The India Freight and Logistics Market is estimated to grow at a CAGR of approximately 4.37% during the forecast period. The freight segment witnessed a mixed short-term effect in terms of the transportation demand, but there is a surge in demand for truck drivers in the transportation of essential goods. However, the supply chain disruption and the slowdown are expected to pull down the freight demand in the medium term. Warehousing demand shot up for products where the manufacturers could not take delivery of raw materials in the pipeline. However, the logistics industry functioned with energy and readiness, balancing the peaks and drops in the demand while protecting its staff and customers.

The robust growth in manufacturing envisioned through the “Make in India” initiative will demand high levels of logistical efficiency, which means that goods must be produced and efficiently transported to markets at reasonable prices. The Multi-Modal Logistics Parks Policy (MMLPs) is a key policy initiative of the Government of India to improve the country’s logistics sector. This initiative will lower freight costs, reduce vehicular pollution and congestion, and cut warehouse costs to promote domestic and global trade. The government is also focusing on strengthening the market in terms of competition, reduced freight rates and barriers, and technological developments. The agricultural, retail, and manufacturing sectors are key sectors boosting the country’s freight and logistics industry.

The road freight market in India is facing challenges given the second wave of COVID-19, however, it is also expected to grow in response to the government initiatives supporting the infrastructural developments and multimodal connectivity in the country. With the liberalization of the Indian market and the reorientation of the industrial and economic policies, all the sectors are trying to keep pace with the modern technologies and exchange of information and ideas with other countries of the world. Given the focus on consumer goods in an on-demand economy, temperature-sensitive pharmaceutical goods, garments, and perishables - the international warehousing and logistics segment is expected to increase its share in the total road transport market during the forecast period.

India logistics sector has witnessed a robust growth with the highest share to freight forwarding market followed by warehousing, courier parcel and express market and value added services market. road freight is the dominant mode of transportation to domestic flow corridors and neighboring international countries. Many real estate developers such as Indospace, Logos India, ESR, etc., are making constant investments in the warehousing market in Gurgaon, Chennai, and Mumbai. The e-commerce sector is becoming extremely popular with the introduction of online payments such as Amazon Pay, Paytm, Gpay, and new popular delivery apps. Small fleet owners dominated the industry (70% of all fleet), operating at a margin of 8-12% and average transaction days of 12-15 per month. The developments of Bhratamala Pariyojana and the Sagarmala projects and the Eastern and Western Dedicated Freight Corridors are expected to boost the industry.

Key Market Trends

Increase in Road Infrastructure:

The Union Minister of State for Road, Transport, and Shipping has stated that the government aims to boost corporate investment in the roads and shipping sector and introduce business-friendly strategies, which will balance profitability with effective project execution. According to the Department for Promotion of Industry and Internal Trade Policy (DPIIT) data, the construction development sector attracted Foreign Direct Investment (FDI) inflow worth USD 25.93 billion between April 2000 and December 2020. Highway construction in India increased at 17.00% CAGR between FY16-FY21. Despite pandemic and lockdown, India constructed 13,298 km of highways in FY21. In October 2020, the foundation stone was established for nine National Highway projects, with a total length of approximately 262 km worth USD 371.13 million in Tripura.

The government of India has allocated USD 1.4 trillion under the National Infrastructure Pipeline for FY 2019-25. The roads sector is likely to account for 18% of capital expenditure over FY 2019-25. In October 2020, the National Investment and Infrastructure Fund (NIIF) made progress toward integrating its road and highway portfolio. The NIIF has acquired Issel Devanahalli Tollway and Essel Dichpally Tollway through the NIIF master fund. These road infra-projects will be supported by Athaang Infrastructure, NIIF’s proprietary road network, assisted by a team of established professionals with diverse domain expertise in the transport field. The government, through a series of initiatives, is working on policies to attract significant investor interest. A total of 200,000 km of national highways is expected to be completed by 2022.

E-commerce driving the logistics Industry:

The Indian E-commerce market is expected to grow to USD 111.40 billion by 2025 from USD 46.2 billion as of 2020. By 2030, it is expected to reach USD 350 billion. Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. As of July 2021, the number of internet connections in India significantly increased to 784.59 million, driven by the ‘Digital India’ Programme. Out of the total internet connections, ~61% of connections were in urban areas, of which 97% connections were wireless. India’s e-commerce orders volume increased by 36% in the last quarter of 2020, with the personal care, beauty, and wellness (PCB&W) segment being the largest beneficiary.

As of October 11, 2021, the Government e-Marketplace (GeM) portal served 7.78 million orders worth USD 19.29 billion to 54,962 buyers from 2.92 million registered sellers and service providers. In a bid to systematize the onboarding process of retailers on e-commerce platforms, the Department for Promotion of Industry and Internal Trade (DPIIT) is reportedly planning to utilize the Open Network for Digital Commerce (ONDC) to set protocols for cataloging, vendor discovery, and price discovery. The department aims to provide equal opportunities to all marketplace players to make optimum use of the e-commerce ecosystem in the larger interest of the country and its citizen. The E-commerce industry has been directly impacting micro, small & medium enterprises (MSME) in India by providing means of financing, technology, and training and has a favorable cascading effect on other industries as well.

Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest E-commerce market in the world by 2034. Technology-enabled innovations like digital payments, hyper-local logistics, analytics-driven customer engagement, and digital advertisements will likely support the growth in the sector.

Competitive Landscape

The India freight and logistics market is fragmented, both international and local players are present in the market. The market is expected to grow during the forecast period due to huge investments are pouring for the infrastructure sector from the government and e-commerce is rapidly growing in the country and many other factors are driving the market.

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