India ramps up investment in logistics to enhance its position in global supply chains

20/09/2024 16:38

In recent years, standing up after huge losses due to COVID-19, India has maintained its position as one of the fastest-growing economies in the world, and at the same time it has also actively participated in agendas, international cooperation and taken advantage of opportunities from the pivot strategy of major countries to improve its position in the whole supply chain bridge.

In India, logistics is an important industry, with 4.6 billion tons of goods handled annually, of which in the domestic market up to 65% is through road and 27% is by rail, and the rest is by other methods. It is estimated that last-mile deliveries cost about 40% of total logistics costs. As a result, in the last decade, logistics costs accounted for 13-14% of India's GDP, which is significantly higher than the 8-11% in most major economies. However, nearly a third of logistics costs incurred are due to inefficient infrastructure. Saving logistics costs will help reduce the price of goods, increase the competitiveness of Indian goods in the global market, thereby benefiting both consumers and manufacturers and elevating the country's economy.

Faced with that situation after a long wait, in September 2022, the Indian government announced the National Logistics Policy (NLP), a comprehensive, interdisciplinary framework to upgrade logistics infrastructure and create an integrated logistics ecosystem in the country. More precisely, NLP shapes the improvement of transportation infrastructure, including road, rail, air, and waterway transportation. Stakeholders, including business owners, managers, and supply chain experts, across all sectors are encouraged to contribute to the realization of the strategy. NLP has added significance in the current context, as global businesses have begun to restructure their supply chains in the "China+1" supply chain trend.

If in 2014, the World Bank ranked India 54th out of 160 countries in the Logistics Performance Index (LPI), 9 years later, the logistics sector in India has continuously improved and ranked 38th in 2023. This significant leap is the result of Government projects such as Bharatmala (improving the road network), Sagarmala (for transport and marine), Udan (regional airport development program) and the Dedicated Freight Transport Corridor (improving the rail transport network). As a result, logistics costs now account for only 8.35% of India's GDP. NLP aims to build on these successes to reduce logistics costs to 5% of GDP and improve India's ranking in the next LPI rankings.

Recently, in September 2024, Indian Prime Minister Shri Narendra Modi announced the inauguration of Tuticorin International Container Port, emphasizing the importance of this event as an important milestone for the logistics industry in particular and the country's economy in general.

Identifying this as the "new star of India's maritime infrastructure", Prime Minister Narendra Modi emphasized the role of the new facility in enhancing the capacity of the V.O.C. Port, stressing that the port is expected to reduce logistics costs and help India. With a draft of more than 14 meters and a berth of more than 300 meters, the port will play an important role in improving the capacity of V.O.C. The new international container port can handle 6 million TEUs per year and receive container ships with a capacity of up to 10,000 TEUs.

With three major ports and seventeen other ports, Tamil Nadu has become a major hub for India's maritime trade. To further boost maritime capabilities and connectivity with the region and the world, India is investing more than Rs 7,000 crore in the development of an Outer Harbour Container Terminal. The operational capacity of the V.O.C. Port will continue to be strengthened, in anticipation of the forecast trade volume to increase in the near future as India becomes "more important" in global supply chains.

Source: logistics.gov.vn