India’s freight and supply chain industry is undergoing a historic shift driven by government reforms, infrastructure investments, and technological innovations aimed at boosting efficiency and sustainability amid ongoing challenges.
India’s logistics sector is undergoing a historic transformation, driven by ambitious government initiatives and growing demand for efficient, sustainable transport solutions. Once plagued by inefficiencies such as fragmentation, high costs, and infrastructure gaps, the sector is now being reshaped through major policy reforms, infrastructure investments, and technological adoption. The government’s focus on creating an integrated, multi-modal transport network through flagship programmes like the PM Gati Shakti National Master Plan, Dedicated Freight Corridors (DFC), and multimodal logistics parks aims to reduce costs, boost efficiency, and make Indian logistics globally competitive.
The PM Gati Shakti initiative stands out by fostering seamless connectivity between roads, railways, ports, and airports, offering an integrated approach to freight movement. According to industry officials, this plan not only cuts transportation time and costs but also promotes greater coordination between multiple government agencies and stakeholders. Complementing this, the DFC project, which completed over 1,000 km of track in the fiscal year 2023-24 and increased daily train operations by 42%, is set to significantly enhance rail freight capacity and reduce dependency on the congested road network that currently handles nearly 70% of cargo movement.
Adding to this infrastructure push, the government is developing 35 Multimodal Logistics Parks (MMLPs) with an estimated investment of ₹50,000 crore under the Bharatmala Pariyojana, a sprawling highway development programme. The MMLPs are designed to provide seamless cargo movement by integrating various transport modes including rail, road, and waterways. Experts highlight that these parks will ease congestion, lower logistics costs, and improve supply chain management, while Bharatmala’s emphasis on developing 50 corridors seeks to interconnect over 550 district headquarters, further enhancing last-mile connectivity. These efforts coincide with the Sagarmala Project – a coastal development initiative aimed at modernizing ports, fostering port-led industrial growth, and developing coastal economic zones to exploit India’s vast maritime potential.
The sector’s evolution is also being shaped by burgeoning e-commerce demand that has heightened the importance of faster last-mile delivery. Companies are extending their networks into Tier 2 and Tier 3 cities with innovative hyperlocal delivery models, thus catering to an expanding consumer base. Market projections estimate India’s last-mile delivery business to reach USD 10.55 billion by 2032, underscoring significant growth prospects.
Digital transformation is another cornerstone of the logistics sector’s modernisation. Adoption of technologies like AI, IoT-enabled fleet management, robotics, blockchain, and predictive analytics is driving smarter, faster, and more transparent supply chains. For instance, some logistics firms are employing AI-powered tools to forecast return shipments, managing inventory efficiently while reducing errors. Despite these advances, challenges remain in achieving end-to-end digital integration across fragmented platforms, limiting route optimisation and data-driven planning in many operations.
While the sector’s growth is promising, substantial challenges temper the pace of progress. India’s logistics costs—though improved to about 7.8–8.9% of GDP—still hover above the global average due to an over-reliance on road transport, fragmented supply chains, and inadequate multimodal connectivity. Infrastructure bottlenecks such as delays in project execution, poor last-mile connectivity, port congestion, and gaps in rail integration continue to inflate costs and delay shipments. The World Bank’s Logistics Performance Index 2023 ranked India 38th out of 139 countries, with infrastructure quality identified as a pressing concern. The negotiation of land acquisition and regulatory clearances remains a stumbling block, with over 850 government projects delayed as of late 2022.
Another persistently thorny issue is regulatory fragmentation. Though the GST rollout eliminated some interstate tax barriers, overlapping regulations and coordination gaps between the Centre and states create inefficiencies. Businesses must comply with a multitude of laws, ranging from the Carriage by Road Act to warehousing and foreign trade regulations, complicating logistics operations and increasing compliance burdens.
The logistics sector also faces a notable skill deficit amid rising labour demands. Expected to add 10 million jobs by 2027, the sector struggles with shortages of trained professionals, especially in supply chain management, warehousing, and technology adoption. Moreover, over 90% of the logistics workforce remains in the informal sector, which contributes to low productivity and poor working conditions, challenging efforts to formalise and upskill the industry.
Environmental sustainability is increasingly recognised as a critical dimension for logistics. With transport contributing around 14% of India’s CO2 emissions—largely from road freight—the government has introduced initiatives like the PM e-Drive scheme to promote electric vehicles and ethanol blending to curb emissions. Zero-emission trucks are being trialled on key highway segments, while coastal shipping and energy-efficient port operations are gaining traction as green alternatives aligned with international standards such as the Energy Efficiency Existing Ship Index (EEXI). However, the adoption of green logistics across the sector is still uneven and requires accelerated incentives and infrastructure support.
The agro-supply chain also demands urgent attention. Despite India’s status as a top producer of perishable goods like milk, fruits, and vegetables, it suffers significant post-harvest losses due to cold chain deficiencies. Over 90% of cold storage facilities are privately operated and highly fragmented, unable to meet the demand for integrated, farm-to-market cold logistics. Experts advocate for the development of solar-powered pack houses, AI-enabled demand forecasting, and enhanced farmer co-ownership models to reduce wastage and improve farmers’ incomes.
To unlock the full potential of India’s logistics sector, experts recommend a combination of streamlined regulatory processes, accelerated infrastructure development, and targeted incentives for multimodal transport. Establishing single-window clearances, harmonising state regulations, and expanding faceless customs assessments can simplify the current labyrinthine framework, reducing delays and costs. Infrastructure priorities include fast-tracking dedicated freight corridors and logistics parks while enhancing last-mile connections to ports and economic hubs. Public-private partnerships, already accounting for a major share of port cargo handling, are vital for scaling infrastructure development efficiently.
Furthermore, a concerted push toward digital adoption is required, leveraging technologies such as blockchain, big data analytics, and cloud platforms to bolster transparency and efficiency. Skill development programmes aligned with emerging technologies, environmental standards, and certification systems can address acute labour shortages while raising sector productivity.
Green logistics policies should be mainstreamed with incentives for electric vehicle integration, alternate fuels, and sustainable practices, positioning India to meet its climate commitments and attract ESG-focused investments. Lastly, improving cold supply chains for agriculture and leveraging logistics diplomacy to foster regional connectivity through agreements with neighbours and global partners can enhance both economic and strategic outcomes.
India’s logistics transformation is critical for the nation’s broader ambitions of achieving Viksit Bharat by 2047 and net-zero emissions by 2070. With continued reform momentum and resolute execution, the sector can shift from being a bottleneck to a backbone of India’s economic growth, job creation, and sustainable development goals. However, the path forward requires overcoming substantial cost, infrastructure, regulatory, and human capital challenges through coordinated action and innovation.
Source: Noah Wire Services
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