Thursday, October 08, 2009: 03:38:13 PM

Logistics Industry: The basics

Globally the logistics industry is estimated to be worth $ 3.5 trillion. Though most of the large service providers are headquartered in Europe, the biggest market is the USA, which constitutes about 25 % of world's logistics market in value.

India is the world's second fastest growing economy, fuelled by growth in infrastructure, booming manufacturing sector, exim trade, retail and agricultural related activities amongst others. Logistics assumes central activity in these growth areas. India spends 14% of its GDP on logistics while most developed countries spend between 8% - 9%. On a $1 trillion GDP this represents approximately $50 billion in excessive spending owing to the inefficiencies and unorganized nature of logistics in India.

In most developed nations, almost 45% - 50% of large organisations outsource their logistics function, while in India it's only about 8%. Further, the government is strengthening the infrastructure with over  $70 billion of investment planned till 2012. Logistics will be one sector which will be the backbone of flourishing trade activity and infrastructure development, and will receive special attention by the government / private sector in coming years.



If India could overcome the inefficiencies, it could become a major transshipment hub

The total Indian freight transport system carried approximately 2.8 billion MT of cargo in FY08; where road enjoyed the highest market share with approximately 65% with rail trailiing with 30% market share.

This high dependence on road transport not only represents inefficiencies arising out of the bad quality of trucks and roads in India, but adds to costs on account of product theft/loss, time taken for delivery on account of state border crossings, loss of visibility of product etc.

In fact, as a country, it is reported that India burnt approximately $ 2.5 billion on fuel burnt on account of trucks standing on check posts. The road transport sector in India remains very largely unorganized with an average trucker in India owning only about seven trucks.

India's container throughput in FY08 - approximately 6.5 million TEUs - represented only a fraction of Dubai (approx 12 million TEUs); Singapore (approx 24 million TEUs) and China (approx 186 million TEUs). So if India could overcome the inefficiencies and lack of infrastructure and regulatory premise for value addition and hubbing, it could become a major transshipment hub utilising it's over 7,000 kms of coastline and an abundance of technically skilled and qualified workforce.


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