Market Trends of india road freight transport Industry
The road sector dominates India's transportation industry, contributing around 3.75% to GDP
- 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 industry contributed around 3.75% of the GDP, and the road sector dominates. More than 50% of freight and 90% of passenger traffic are handled by road. 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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Owing to numerous tax hikes in the country, fuel prices are expected to increase
- Fuel costs in India have sky-rocketed to current levels due to the combined effects of rising benchmark Brent prices and numerous tax hikes over the past few years. 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 significantly as they have limited ability to pass on the rising prices, which account for 70% of the cost of operating a truck. Moreover, India's oil demand is expected to grow by about 11% in 2024.
- 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 in the country 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 oil 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. Moreover, domestic gasoline demand, used mainly in passenger vehicles, is expected to rise in the coming years. 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
- Agriculture Infrastructure Fund (2020-2032) worth USD 12.08 billion to provide a major boost to Indian agriculture sector
- The Indian e-commerce market is expected to become the second-largest worldwide by 2034
- India's rank rose six places to 38 in LPI 2023, fueled by strategic policies and infrastructure advancements
- India announced Foreign Trade Policy 2023, and exports are anticipated to reach USD 2 trillion by 2023
- Increased fuel costs and toll charges by NHAI led to an increase in overall truck operational costs in India
- The Indian government’s budget allocation worth USD 631 million is driving initiatives to subsidize and promote the adoption of electric vehicles
- Inflation coupled with increasing fuel and input costs driving road freight rate increases
- Economic and supply shocks from the Ukraine-Russia War disrupted supply chains, leading to an increase in costs
- Growing construction and agricultural goods demand supported by growing population and investments
- The manufacturing industry of India is expected to reach USD 1 trillion by 2025
- India emerged as the second-largest global road network holder, surpassing China, and it achieved 1.45-lakh km expansion over 8 years
- 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
- Road freight volume in India to grow with the upcoming High-Speed Corridor Network by 2047
- Land transportation contributed more than 90% of freight transportation in 2022, supported by increased government investment and foreign FDI
