N4S:
Big on plans, slow in delivery—India’s logistics is at crossroads.The UPSC often uses large themes like inclusive growth or economic competitiveness to ask specific questions where aspirants must connect the dots. The 2021 question—“Investment in infrastructure is essential for inclusive growth”—is a classic example. Here, aspirants struggle because they either write only about roads and ports, or only about inclusion. They miss real sectors like logistics that tie both together.This article fixes that gap. It brings India’s logistics story to life—with examples, figures, and insights that help you write sharper, richer answers. It moves beyond buzzwords like PM Gati Shakti and explains why India still spends 14–18% of its GDP on logistics, while countries like China spend less than 10%. You’ll find crisp subheads like ‘Fragmented Supply Chains’, ‘Underutilized Rail & Waterways’, and ‘Poor Warehousing Infrastructure’ that break down complex problems with real examples (e.g. “Delhi to Chennai by truck takes 6–7 days; by train, it’s 40% cheaper and faster”).
This article explores India’s logistics sector and its crucial role in infrastructure-led inclusive growth, a theme UPSC often tests as seen in the 2021 question on investment in infrastructure. Aspirants usually focus only on roads or inclusion, missing how logistics connects both.
The article bridges that gap with data and practical insights. It explains why India’s logistics costs remain high at 14 to 18 percent of GDP, compared to China’s under 10 percent. Subheads like ‘Fragmented Supply Chains’ and ‘Underutilized Rail and Waterways’ help break down challenges using real examples, such as the cost and time differences between road and rail. This approach equips aspirants to write answers that are structured, fact-based, and policy-aware.
PYQ ANCHORING
- GS 3: Investment in infrastructure is essential for a more rapid and inclusive economic growth. Discuss in the light of India’s experience. [2021]
MICROTHEME: Inclusive Growth X Infra structure
India’s logistics sector has been the elephant in the room—too big to ignore, yet too sluggish to reform. Despite the hype around highways, digital dashboards, and multimodal dreams, the ground reality remains grim: moving goods across India still costs nearly twice as much as it should. With logistics guzzling 14–18% of our GDP, inefficiency isn’t just a flaw—it’s a full-blown crisis.Yes, the buzzwords are flying—PM Gati Shakti, green logistics, tech integration—but why hasn’t it translated into leaner, faster, and cheaper movement? Is policy outpacing execution? Or is the system simply too broken to fix overnight?
Reasons for high logistics cost in India
| Cause | Explanation | Specific Example |
| 1. Overdependence on Road Transport | Roads handle ~60% of freight, which is less fuel-efficient and costlier than rail or waterways. | A truck journey from Delhi to Chennai takes 6–7 days with high fuel and toll costs, while a freight train can cover it in 2–3 days at ~40% lower cost. |
| 2. Fragmented Supply Chain | Thousands of small logistics providers operate in silos, lacking coordination. | A small Kirana store in Kanpur may use 3–4 different vendors (transport, warehousing, packaging) leading to redundant costs and poor inventory tracking. |
| 3. Underdeveloped Rail and Water Freight | Rail is cost-effective but underused; waterways are still in nascent stages. | Rail freight share has fallen below 30% vs. China’s 47%; Jal Marg Vikas Project on Ganga still covers limited stretch between Varanasi–Haldia. |
| 4. Inefficient Modal Mix | Lack of integration between road, rail, air, and water increases logistics cost and time. | In Maharashtra, onions are transported only by road to Kolkata due to absence of a nearby multi-modal logistics park. |
| 5. Poor Warehousing Infrastructure | Warehouses are small, scattered, and lack tech integration, especially for cold storage. | In Bihar, 30% of fruits and vegetables perish due to lack of cold chain warehouses, leading to waste and inflated retail prices. |
| 6. Regulatory Bottlenecks | Delays from road taxes, permits, and legacy systems despite GST. | A truck carrying goods from Uttar Pradesh to Assam still undergoes multiple state-level checks, delaying shipments by 1–2 days. |
| 7. Last-Mile Delivery Challenges | Dense cities, poor road networks, and inadequate EV infrastructure inflate last-mile costs. | In Bengaluru, last-mile delivery for e-commerce is 20–25% of total logistics cost due to traffic and address mapping issues. |
| 8. Lack of Digitization and Real-Time Tracking | Manual processes dominate among small operators; limited tech adoption. | A small fleet operator in Rajasthan uses handwritten ledgers and has no GPS or route optimization, causing fuel waste and delivery delays. |
| 9. Skilling Gaps | Shortage of trained drivers, warehouse handlers, and logistics professionals. | A CII report (2023) noted that 30% of trucks remain idle due to unavailability of trained commercial drivers in Punjab and Haryana. |
State of India’s Logistics Sector
India’s logistics sector includes everything that helps move goods—by road, rail, air, and waterways. It also covers warehousing, supply chain management, and services like packaging and cold storage. In short, it’s the invisible network that keeps India’s economy moving.
- A Big Chunk of the Economy: The logistics sector contributes around 13–14% to India’s GDP (NCAER, 2021–22).
- Massive Employment Generator: It gives jobs to over 22 million people in areas like transport, warehousing, packaging, and logistics services (CII, 2024).
- High Cost Burden: Logistics eats up 14–18% of India’s GDP, much higher than the global average of 8–10%.
- Private Investment on the Rise: In just the first half of 2024, 66% of total private equity investments (led by giants like KKR and Abu Dhabi Investment Authority) went into logistics. Reliance Logistics alone raised $1.54 billion.
- Warehousing Boom: Warehousing space absorption jumped by 25% YoY in 2024.
- Environmental Impact: The sector contributes about 13.5% of India’s total greenhouse gas emissions—mostly from road transport (IEA, 2023).
- Third-Party Logistics (3PL): Rapid growth due to booming e-commerce, quick commerce (Q-commerce), and manufacturing.
Logistics in India: Where Ambitious Policies Fall Short
1. Fragmented Implementation across Ministries
| Problem | Assessment | Example |
|---|---|---|
| Multiple ministries handled roads, railways, shipping, and commerce independently with poor coordination. | Led to delays, duplication, and piecemeal infrastructure instead of integrated logistics. | The Dedicated Freight Corridors (DFC) took over a decade, partly due to lack of alignment between Railways and state governments on land acquisition. |
2. Focus on Physical Infrastructure, Not End-to-End Integration
| Problem | Assessment | Example |
|---|---|---|
| Past efforts prioritized building roads, rails, or ports individually. | But without warehousing, digital tracking, and multi-modal linkages, overall logistics efficiency remained low. | National Highway expansions (e.g. NH-44) improved road capacity, but warehouses near key junctions (like Nagpur) remained underdeveloped and disconnected. |
3. Underutilization of Inland Waterways and Rail Freight
| Problem | Assessment | Example |
|---|---|---|
| Despite policies like Sagarmala and Jal Marg Vikas, modal shift didn’t happen. | Investors remained hesitant due to poor first-mile/last-mile connectivity and shallow river depths. | On NW-1 (Ganga), despite trial cargo runs between Varanasi and Haldia, steady cargo movement remains <5% of targets (Inland Waterways Authority, 2023). |
4. Lack of Skilled Manpower and Logistics Professionals
| Problem | Assessment | Example |
|---|---|---|
| Most policies ignored capacity building and skilling. | This resulted in untrained truck drivers, inefficient warehouse staff, and poor service quality. | National Skill Development Corporation (NSDC) identified a shortage of 3 lakh+ trained logistics workers in 2022, but training centers failed to scale in Tier 2–3 cities. |
5. Slow Tech Adoption and Poor Digitization
| Problem | Assessment | Example |
|---|---|---|
| Logistics tech platforms were fragmented and adopted only by large players. | Small operators lacked access or awareness, and digital public infrastructure wasn’t integrated. | The e-LogS platform launched by DPIIT failed to see mass adoption due to poor onboarding support for MSMEs in states like Jharkhand and Odisha. |
6. Ineffective Monitoring and Outcome Measurement
| Problem | Assessment | Example |
|---|---|---|
| Most policies lacked clearly defined KPIs or timelines. | Monitoring was input-focused (e.g., kms built) rather than on logistics cost, speed, or carbon impact. | Under Bharatmala, while targets were met for highway length, logistics cost (14–18% of GDP) remained unchanged for 5+ years (Economic Survey 2023). |
7. State-Centre Coordination Challenges
| Problem | Assessment | Example |
|---|---|---|
| Logistics being a cross-sectoral and partly state subject led to friction in land acquisition and planning. | States often had their own warehousing or industrial park schemes that didn’t align with central plans. | In Tamil Nadu, the state’s logistics parks near Sriperumbudur were planned independently, missing integration with PM Gati Shakti’s multi-modal vision. |
INVESTMENT IN LOGISTICS FOR INCLUSIVE GROWTH
India’s ambition to become a $5 trillion economy hinges significantly on its ability to move goods and services efficiently. Logistics — the backbone of commerce — connects production with consumption, rural areas with urban markets, and MSMEs with global value chains. Over the years, inadequate logistics infrastructure has imposed high transaction costs and time delays. Recent initiatives are attempting to fix this. But for growth to be both rapid and inclusive, logistics investment must be smart, integrated, and equitable.
| Point | Why It Aids Inclusion | Example |
| 1. Connects remote and rural areas to mainstream markets | Reduces isolation, enables producers to access better prices and opportunities | Cold chains in North East help tribal farmers sell perishable produce in metros |
| 2. Supports small farmers and MSMEs | Enables small producers to scale and compete by reducing costs and delays | Rural food processing units in Bihar use logistics parks to access national markets |
| 3. Generates employment across skill levels | Provides jobs in transportation, warehousing, packaging, delivery — especially for youth and migrants | E-commerce logistics (like Flipkart’s Ekart) hires thousands from semi-urban areas |
| 4. Reduces regional disparities | Infrastructure corridors bring investments and development to lagging states | Bharatmala roads improve connectivity in backward districts of Odisha and Chhattisgarh |
| 5. Improves access to essential services | Ensures timely delivery of food, medicines, fertilizers to underserved populations | Jan Aushadhi and PDS logistics ensure medicine and grain delivery in tribal belts |
| 6. Encourages women’s participation | Warehousing, packaging, and e-commerce delivery hubs create job avenues for women | Amazon’s women-only delivery stations in Gujarat and Tamil Nadu |
| 7. Enables social protection and crisis response | Rapid logistics improves disaster response and delivery of aid | PMGKAY food grains reached interior villages during COVID due to logistics coordination |
| 8. Formalizes the informal sector | Investments in digital logistics platforms integrate small players into the formal economy | ONDC enables kirana stores in small towns to reach national buyers |
Way Forward
The Road Ahead for India’s Logistics Sector
- Use More Rail and Water, Less Road:Shift heavy cargo to rail and rivers to cut costs.
Ex: Fully use Eastern & Western freight corridors and Ganga waterway. - Go Digital for Smarter Movement:Expand real-time tracking and single-window systems.
Ex: Connect private logistics apps with the government’s ULIP platform. - Skill the Workforce at Scale: Train youth in logistics tech, cold chains, EV delivery.
Ex: Set up training hubs in smaller cities like Indore and Patna. - Push for Green Logistics: Support electric trucks and solar-powered warehouses.
Ex: Replicate Delhi–Jaipur electric freight corridor model. - Fix Urban Goods Movement: Plan city freight better with low-emission zones and hubs.
Ex: Build mini freight hubs in cities like Pune and Bengaluru. - Let Private Players Innovate: Open up data and support startups with ideas.
Ex: Let firms like Shiprocket use Gati Shakti maps to improve delivery.
#BACK2BASICS:
Strategic Significance of Logistics Secor
1. Boosts Economic Growth & Global Competitiveness
If India brings down its logistics costs by even 1% of GDP, it could save $15 billion (McKinsey). The sector underpins programs like Make in India, Ease of Doing Business, and export competitiveness.
2. Powers Infrastructure & Urbanization
Major hubs like Mumbai, Chennai, NCR, and Pune are becoming high-efficiency logistics centers. Meanwhile, Tier-2/3 cities like Patna, Lucknow, and Coimbatore are emerging in warehousing and cold storage.
3. Creates Jobs & Upskills Youth
With 22 million people already employed, the sector has huge potential for new jobs. The 2025 Union Budget has announced five National Centres of Excellence for skilling youth in logistics and warehousing.
4. Critical for Climate Action
Decarbonizing logistics is vital if India wants to hit its Net Zero by 2070 target. That means cutting emissions from trucks, warehouses, and outdated logistics networks.
5. Supports Every Key Sector
Whether it’s e-commerce, agriculture (cold chains), pharma, or retail—logistics is the backbone that connects producers to markets.
6. Drives Inclusive Development
Logistics networks improve rural access, help MSMEs reach markets, and connect remote regions to the national economy—supporting the goal of a Viksit Bharat by 2047.
7. Strengthens India’s Geopolitical Hand
Projects like the Delhi–Mumbai Industrial Corridor and Sagarmala enhance India’s geo-economic leverage. A resilient logistics network is also key to supply chain security and national defense.
LOGISTICS SECTOR INITIATIVES
1. PM Gati Shakti (2021)
A digital platform for coordinated infrastructure planning across ministries. The 2025 Budget made this data available to private companies to boost planning and reduce delays.
2. National Logistics Policy (2022)
Targets lowering logistics costs to under 10% of GDP. Focuses on multi-modal transport, digital systems, skilling, and green logistics.
3. Multi-modal Logistics Parks (MMLPs)
Over 35 planned under a public-private partnership (PPP) model. These integrate road, rail, air, and waterways to make transport smoother and greener.
4. Green Freight Initiatives
Includes electric highways (e.g., Delhi–Jaipur), solar-powered warehouses, and EV-based last-mile delivery. There’s also support for biofuels, LNG ships, and even hydrogen-powered transport.
5. Logistics Skilling Hubs
Five Centres of Excellence for training youth in logistics announced in Budget 2025, with support from both government and private players.
6. Sagarmala & Bharatmala Projects
Improving port and road connectivity to reduce transit times and logistics costs by up to 25%.
7. Dedicated Freight Corridors (DFCs)
New freight rail lines (Delhi–Mumbai and Punjab–Bengal) that move cargo off highways, reducing road congestion and carbon emissions.
8. Inland Waterways Push
India plans to triple river cargo traffic by 2030, with the Ganga and Brahmaputra already under development (Jal Marg Vikas Project).
