Market Trends of india freight and logistics Industry
Government and private investments, rising exports, and the increasing interstate movement of goods are the major drivers of the transportation industry
- India's road transportation services led the pack in 2021, contributing the most substantial gross value added (GVA) at over INR 3 trillion (USD 36.3 billion). This marked a decrease from the preceding fiscal year. Communication and broadcast services secured the second position, with a GVA of around INR 2.2 trillion (USD 26.62 billion) during the same period. The logistics sector is pivotal in facilitating the seamless flow of goods and services within the country and internationally. This diverse array encompasses prominent domestic entities, global industry frontrunners, the postal service's express division, and emerging startups specifically aiming to facilitate e-commerce deliveries.
- The transportation and storage sector contributed around 3.1% of the GDP in 2022. Government and private investments, rising exports, the increasing interstate movement of goods and passengers, the growing FMCG sector, and rising disposable incomes are the major drivers of the transportation industry in India. To boost connectivity across the country, 100% FDI has been allowed in the roads and highway sector via automatic routes.
- India's road transport sector registered an improvement in prices in December 2021 due to higher industrial activity, even as demand for transportation from the consumer goods sector declined. In 2022, India was a major manufacturing hub in Asia, and infrastructure advancements made it easier for manufacturers to import goods and guarantee a higher export level. Due to the significant advancement in rail transportation that ensures faster transit times, it cannot operate on a low inventory model.
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The diesel price increase was less sharp than the increase in petrol prices due to VAT cuts offered by several state governments
- In September 2023, oil prices hit a 10-month high of nearly USD 90 per barrel as Saudi Arabia and Russia extended their voluntary production and export cuts until the end of 2023. As India imports 85% of its oil, the fuel prices were impacted. According to the All-India Motor Transport Congress, which represents more than 14 million truckers and bus and tourist vehicle operators, the soaring fuel prices are impacting India's truckers as they have limited ability to pass on the rising prices, which account for 70% of the cost of operating a truck.
- The operating cost for India's truckers rose by nearly 40% in 2022 as the continuous increase in diesel prices wreaked havoc. Sometimes, the truckers absorb this cost pressure due to long-term contracts with customers. As per the official data by Petroleum Planning and Analyses Cell, petrol prices rose by a whopping USD 0.28 per liter between April 1, 2020, and March 31, 2021, the highest ever levels to be recorded so far. India's petrol demand rebounded above pre-COVID-19 levels in 2021.
- The diesel price increase was less sharp than the increase in petrol prices due to VAT cuts offered by several state governments to keep the price rise of diesel under manageable levels. Oil marketing companies have been lenient on diesel price rises lately, reducing the quantum of a hike compared to petrol. In 2022, global crude prices reached an all-time high as Russia's invasion of Ukraine threatened to curtail supply, whereas the impact on fuel in India has been minimal. However, fuel prices were hiked, and the consumption demand decreased due to high inflation, which impacted the economic recovery of India.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- Indian urban population to grow to 43.2% by 2035, and Mumbai held the highest percentage share of total population in 2022
- Growing construction and agricultural goods demand supported by growing population and investments
- The Indian e-commerce market is expected to become the second-largest worldwide by 2034
- India announced Foreign Trade Policy 2023, with exports reaching a market value of USD 2 trillion in 2023
- Increased fuel costs and toll charges by NHAI led to an increase in overall truck operational costs in India
- India's rank rose six places to 38 in LPI 2023, fueled by strategic policies and infrastructure advancements
- Land transportation contributed more than 90% of freight transportation in 2022, supported by increased government investment and foreign FDI
- India is aiming to enhance maritime connectivity, with a focus on the ports of Mundra, Nhava Sheva, and Pipavav
- Rising developments in road length and railway infrastructure investments are boosting freight pricing in India
- India ranked first in Central and Southern Asia, 40th position globally, in the Global Innovation Index 2022
- Agriculture Infrastructure Fund (2020-2032) worth USD 12.08 billion to provide a major boost to Indian agriculture sector
- Economic and supply shocks from the Ukraine-Russia War disrupted supply chains, leading to an increase in costs
- The manufacturing industry of India is expected to reach USD 1 trillion by 2025
- Natural gas imports in India might double by 2030 amid rising domestic demand
- Rising product launches owing to BS-VI emission standards are increasing the sales of commercial vehicles
- The Indian government’s budget allocation worth USD 631 million is driving initiatives to subsidize and promote the adoption of electric vehicles
- Maritime cargo capacity is expected to increase owing to increasing imports, simplification of clearance processes, and rising oil consumption
- India has planned to invest USD 82 billion in increasing the cargo handling capacity of the ports to over 3300 million tons per annum
- Road freight volumes are driving the demand for freight services in India, supported by the USD 33 billion investment in road infrastructure
