The logistics sector in India has witnessed significant growth and several positive developments, with the market currently valued at over $310 billion. This growth has been driven by e-commerce growth and expansions in the manufacturing industry, with significant government and private sector investments. The sector has also been shaped by technological and sustainable initiatives aimed at increasing efficiency and reducing the carbon footprint. Further, noteworthy expansions in logistics infrastructure, such as warehouse expansions and efforts by supply chain service providers to streamline operations, have contributed to the sector’s progress over the past few years.
Trends in freight movement
The modal mix of freight movement in India is highly skewed. As per industry estimates, around 66 per cent of freight movement takes place via roads, followed by around 30 per cent by railways. In contrast, ports, shipping, inland waterways and airfreight together account for only around 4 per cent. In addition, high transportation costs and rising emissions associated with road freight movement underscore the need to change India’s freight modal mix.
To address these challenges and improve operations, the government has implemented policies aimed at increasing the share of rail freight in the overall mix. The movement of freight via rail is known to have a lower carbon footprint and notable cost advantages. The National Rail Plan aims to create a future-ready railway system by 2030 and increase the modal share of rail freight movement. Ongoing developments under the dedicated freight corridors are also aligned with this target, promising enhanced freight movement efficiency, cost benefits and reduced energy consumption rates. In addition to this, the development of Gati Shakti multi modal cargo terminals and recently sanctioned projects are expected to provide a significant impetus to the sector, and is likely to increase the share of railways in the overall freight mix to 35-45 per cent by 2030.
Apart from these, newer modes of freight movement are emerging. Hi-tech initiatives such as the use of drones for last-mile deliveries are gaining momentum. These advanced mobility solutions can address challenges such as road congestion, rising urban density and last-mile connectivity to remote or difficult terrain.
Growth of logistics infrastructure
Industrial warehouses
Expansions in the e-commerce and manufacturing segment have led to a sustained rise in warehousing demand. Grade A warehouses, in particular, have witnessed significant growth. As per industry estimates, during the first six months of 2024, the total stock of Grade A warehousing stood at over 200 million square feet and Grade B at more than 180 million square feet in the top eight cities of Mumbai, Delhi NCR, Bengaluru, Kolkata, Chennai, Hyderabad, Ahmedabad and Pune. Further, the overall demand for warehousing spaces for consumer and industrial products is projected to grow at a CAGR of more than 7 per cent between 2022 and 2027, reaching almost 1,200 million square feet. Warehouse stock is expected to grow at a similar pace, reaching over 1,280 million square feet by 2027, with Grade A warehousing stock expected to grow faster at 17 per cent. The warehousing segment has also witnessed an increase in private equity, supported by strong demand from third-party logistics (3PL) and e-commerce players.
Apart from this, warehouses are integrating technologies to streamline operations. Automation and robots are streamlining processes and reducing manpower requirements. Moreover, facilities are increasingly adopting renewable energy solutions and sustainable practices, such as maximising daylight use, using LED lighting and other energy-efficient initiatives to reduce their carbon footprints.
Apart from this, emerging warehousing requirements such as in-city warehouses, dark storage facilities, and custom and built-to-suit warehouses are gaining traction, and are expected to drive future developments in the sector.
Agricultural warehouses and silo storage
The growth of the agricultural sector and the rising focus on food security have underscored the importance of developing advanced agricultural and silo storage facilities. As of November 1, 2024, the central pool storage capacity with the Food Corporation of India (FCI) and state government agencies stood at around 77 million metric tonnes (mmt), of which FCI accounted for over 40 mmt while state agencies, including state warehousing corporations, managed over 36 mmt. Further, over 800 warehouses were registered with the Warehousing Development and Regulatory Authority in 2023-24 alone.
Over the years, silo storage facilities have also gained traction. These facilities require less land in comparison to traditional warehouses, and provide efficient grain handling. FCI has also developed state-of-the-art silo projects like the Darbhanga Silo Project in Bihar, the Sahnewal Silo project in Punjab and the Baroda Silo Project in Gujarat. These facilities aim to improve food security through increased storage capacity, better preservation, use of automated systems, lower operational costs, and integration of road and rail transportation links.
The sector has also been a beneficiary of various government schemes and initiatives including Agricultural Marketing Infrastructure, under which more than 48,510 storage infrastructure projects with a storage capacity of more than 90 mmt have been sanctioned as of June 2024, and the Agriculture Infrastructure Fund, under which over 13,350 warehouses have been set up as of July 2024. Emerging trends include the promotion of public-private partnerships for developing agricultural warehousing facilities, and the integration of smart and sustainable solutions in these facilities.
The agricultural segment is poised for robust growth, with the agricultural warehousing storage capacity estimated to cross 350 mmt by 2028-29. Further, silo storage capacity in the country is projected to reach around 20 mmt by 2030.
Cold storage facilities
Cold storage facilities have witnessed strong demand, driven by the increasing need for preserving perishable commodities, which has been a key driver for the steady growth of the segment. As of August 2024, the country had over 8,690 cold storage units with a capacity of more than 39 mmt. Government initiatives, such as the Scheme for Integrated Cold Chain, Food Processing and Preservation Infrastructure under the Pradhan Mantri Kisan Sampada Yojana, aim to reduce post-harvest losses. However, the sector still faces challenges such as fragmentation, insufficient last-mile connectivity and infrastructural gaps. Further, the high-energy-intensive nature of cold storage facilities has prompted a shift towards developing net zero cold storage facilities.
MMLPs
The logistics sector is poised for further growth with the ongoing development of multimodal logistics parks (MMLPs). These facilities aim to reduce logistics costs by integrating transport hubs, storage, etc. They are designed to serve as intermodal freight handling facilities, reduce emissions and enable a hub-and-spoke model. MMLPs are also tailored to provide customised warehousing solutions to a range of industries, along with dedicated areas for operations such as packaging and processing. Moreover, these MMLPs aim to integrate sustainable initiatives, including EV charging facilities. As of 2023-24, the Ministry of Road Transport and Highways has awarded six MMLPs, in Jogighopa, Chennai, Indore, Bengaluru, Nagpur and Jalna. Of the seven planned to be awarded in the current fiscal year, three – Anantapur, Pune and Nashik – are currently under bidding, with bids for Patna, Hyderabad, Coimbatore and Jammu expected to follow soon.
Others
Other logistics infrastructure segments have also witnessed notable progress over the years. Ports serve as key hubs for cargo movement. India currently has over 165 container freight stations (CFSs), which consolidate and segregate cargo, and reduce congestion at ports. Further, with over 129 inland container depots, these ports are well connected to the hinterlands. CFS facilities have supported the e-commerce segment by amalgamating large volumes of small parcels into containers. To further enhance efficiency, these facilities are increasingly working towards decreasing dwell times, enabling the handling of a higher number of vessels.
Apart from this, India’s container market plays a key role in freight movement via ports, inland waterways and rail. During September 2024, the container count stood at 0.49 million for imports and 0.45 million for exports. Ports are focusing on improving their operational efficiency, with nine Indian ports ranked among the top 100 in the 2023 Container Port Performance Index. While domestic container manufacturing is at a nascent stage, government initiatives like the revised production-linked incentive for containers are expected to accelerate the manufacturing of shipping containers.
Trends and advancements in supply chain management
3PL/4PL and express logistics
The growth in e-commerce operations and increasing commodity volumes have driven businesses to adopt services from 3PL/4PL logistics players, with the market size of 3PL valued at over $37 billion as of 2023. These players have the technical expertise to provide supply chain services, including storage and transportation, leading to cost reductions, faster processing and enhanced operational efficiency. Looking ahead, the 3PL market is projected to grow at a CAGR of around 7 per cent to cross $55 billion by 2029.
The domestic express industry was valued at around Rs 320 billion in 2023. Despite being highly fragmented with around 1,000 active players, technology integration continues to be a key trend, ensuring quick and efficient delivery processes.
Further, express hubs are being set up in the country. The sector is expected to benefit from the rise in e-commerce, evolving consumer behaviour and the increasing importance of value-added services, with the market size projected to reach over Rs 710 billion by 2029.
The adoption of technology has significantly enhanced services in these segments. Route optimisation software has streamlined last-mile delivery processes, thereby reducing fuel consumption. Further, the use of software for real-time tracking has improved the overall visibility of the supply chain. With net zero targets in mind, players are adopting electric vehicles and exploring alternative fuels for freight decarbonisation. For example, GreenLine Mobility Solutions recently partnered with Flipkart for the deployment of 25 liquefied natural gas (LNG) trucks. GreenLine also partnered with Exide Industries to integrate LNG trucks into its operations. GreenLine’s current fleet consists of over 500 LNG trucks, and it aims to expand this by an additional 1,000 trucks by March 2025.
Freight forwarding
Rising import and export activity and increased manufacturing output have led to significant growth in the freight forwarding segment. The freight forwarding market in India is valued at around $10 billion as of financial year 2024. This is projected to grow at a CAGR of around 11 per cent to reach around $17 billion by financial year 2029. Key growth drivers include technology integration, policy support and ongoing infrastructural developments.
Challenges
While the sector has been progressing positively, high logistics costs remain a significant challenge to the overall growth of the industry. In comparison to other developed countries, logistics costs in India are much higher at around 13-14 per cent of the GDP. The government has been working towards reducing the logistics cost to 8-9 per cent of the GDP with the launch of initiatives such as the PM Gati Shakti National Master Plan and the National Logistics Policy. Additionally, emerging trends like the integration of technology are expected to increase efficiency, speed up processes and streamline operations, thereby contributing to cost reduction.
The sector also faces challenges related to inadequate infrastructure like connectivity and storage facilities in remote and hard-to-reach regions. Last-mile connectivity, especially for the cold chain, continues to witness significant gaps in remote regions. Various logistics segments, including cold chain, express logistics and agricultural supply chain, are characterised by fragmented markets with numerous small players.
Other challenges include regulatory hurdles and security concerns at various points in the supply chain.
Segment outlook
The logistics sector in India has witnessed significant advancements, driven by growth in ecommerce, rising 3PL activity and strong demand-side dynamics. According to India Infrastructure Research, the logistics market is expected to grow at a CAGR of 8-10 per cent to cross $480 billion by 2029. In line with current trends, leveraging advanced technologies like AI and ML can enable predictive analytics, making players future-ready. There is also a need to upskill the workforce to keep up with these technological advancements. The adoption of sustainable measures to reduce the carbon footprint within supply chains is expected to remain a key focus area.
On the warehousing and storage front, rising demand is expected to spur the development of state-of-the-art facilities that cater to consumer needs. Emerging large-scale logistics parks are also expected to shape the sector by offering benefits such as economies of scale, scalability and shared infrastructure.
Rising consumer demand for faster deliveries is expected to drive the growth of hyperlocal deliveries in India. Apart from this, the sector will witness opportunities backed by an increase in demand, particularly from Tier II and Tier III cities.
The sector also stands to benefit from recent initiatives such as the $350 million policy-based loan signed between the Government of India and the Asian Development Bank under the second subprogramme of the Strengthening Multimodal and Integrated Logistics Ecosystem programme. This initiative reportedly aims to expand the country’s manufacturing sector and enhance supply chain resilience.
Looking ahead, these initiatives are expected to lower logistics costs in the country, enhance supply chain efficiency and provide a favourable environment for the sector’s continued growth.
