By Mahesh Fogla
Logistics is an integral part of the supply chain process that ensures an efficient flow and storage of goods and services from the point of origin to the consumption point. In India, logistics accounts for 13% to 14% of the GDP, a higher proportion as compared to 8% to 11% in most of the major economies.
In September 2022, the Indian government eventually released the much-awaited National Logistics Policy (NLP), a comprehensive cross-sectoral framework aimed at upgrading the country’s logistics infrastructure. The primary objective of India’s NLP is to lower logistics costs, thereby enhancing the competitiveness of Indian goods and spurring economic growth. Furthermore, the policy aims to leverage emerging digital technologies to improve logistics-related activities such as tracking, customs procedures, and compliance.
A significant focus of the NLP is on promoting ‘multimodal logistics,’ which integrates various transportation modes such as rail, road, sea, and air. This approach holds immense potential to reduce logistics expenses and streamline cargo movement across India.
The NLP’s emphasis on multimodal logistics significantly reflects our Honourable Prime Minister, Narendra Modi’s vision for efficient goods movement, akin to the transformative impact of the Unified Payments Interface (UPI) in banking. By harmonizing different transportation modes, the NLP promises to optimize supply chain efficiency and boost India’s competitiveness in the global market.
One of the primary objectives of the NLP is to employ multimodal logistics to reduce logistics costs substantially. By integrating inland waterways with existing rail and road networks, India aims to mitigate congestion and lower transportation expenses. This strategic approach aligns with the country’s broader agenda of modernizing transportation infrastructure and embracing sustainable practices.
India has improved consistently owing to the Honourable Prime Minister Gati Shakti projects such as ‘Bharatmala’ (road network improvement), ‘Sagarmala’ (shipping and maritime development), ‘Udan’ (regional airport development program) and ‘Dedicated Freight Corridors’ (improving rail freight network). However, even with India making this commendable progress in improving its Logistics Performance Index (LPI), moving from the 54th position in 2014 to the 38th position in 2023, according to the World Bank’s Logistics Performance Report, challenges still persist. India’s vast geographical expanse, coupled with densely populated urban centers, poses logistical challenges in terms of connectivity and last-mile delivery.
The road transport sector, which predominantly comprises small operators with fewer than ten trucks, also faces organizational turmoil. However, technological advancements are gradually bridging this gap, enabling a smoother integration of road transport into multimodal logistics systems. Additionally, rail transport, known for its cost-effectiveness, faces challenges related to last-mile connectivity. Yet, by enhancing integration with multimodal logistics, rail transport can overcome these challenges and play a more elaborate role in freight movement.
Air transport, although currently accounting for a minimal share of freight movement, holds untapped potential. India’s growing GDP and evolving geopolitical landscape demonstrate the importance of air transport in multimodal logistics. Despite facing cost constraints, air transport can offer swift and efficient cargo movement, especially in times of geopolitical tensions or urgent supply chain requirements.
Despite these challenges, the advantages of multimodal logistics outweigh their disadvantages. By smoothly integrating various transportation modes, businesses can enhance efficiency, reduce costs, and improve overall supply chain management. Similarly, as India continues to invest in infrastructure and adopt technological innovations, these hurdles will gradually diminish, paving the way for a more robust multimodal logistics ecosystem.
In conclusion, the National Logistics Policy’s emphasis on multimodal logistics marks a prominent shift in India’s logistics landscape. Collaborative efforts from policymakers, businesses, and innovators are driving progress towards a more efficient logistics network, despite the existing challenges. India’s substantial infrastructure spending, projected to reach around INR 143 trillion by 2030, presents a crucial opportunity to shape the future of the logistics sector. However, proactive, long-term planning is necessary to ensure the sector’s readiness for the future. Ultimately, by implementing strategic interventions and encouraging innovation, India can enhance its global competitiveness and work towards achieving its goal of becoming a $5 trillion economy by 2027.
(The author is Mahesh Fogla, Executive Director, Patel Integrated Logistics Limited, and the views expressed in this article are his own)
