India cuts logistics costs to below 9% of GDP with higher state spending

By Manoj Kumar

NEW DELHI (Reuters) – India’s logistics costs have come down to below 9% of gross domestic product, helped by rising state spending on roads, ports and digitisation, a report commissioned by the federal government said on Friday, and could boost manufacturing.

“In terms of competitiveness, logistics costs for our producers – both domestic and exporters – have come down,” Rajesh Kumar Singh, secretary at the federal Department for Promotion of Industry and Internal Trade (DPIIT) said after the launch of the report.

He said logistics costs were now comparable to many Western economies, and the government was aiming to further improve infrastructure through higher state and private investments.

The report “Logistics Cost in India” authored by Delhi-based think-tank National Council of Applied Economic Research, said logistics costs including transportation, warehousing, insurance and administrative charges had come down thanks to improvements in road network, tax reforms and digitisation of supply chains.

The logistics costs were down in the range of 7.8% to 8.9% of GDP in 2021/22, compared to 8.8% to 10% of GDP in 2012/13, said Poonam Munjal, the lead author of the report.

According to the World Bank’s Logistics Performance Index, India climbed six places to rank 38th out of 139 countries in 2023, helped by improving road and port networks and digitisation of the supply chains.

The average dwell time, the waiting time for a truck cargo at a port, was just 3 days in India when compared to 7 days in the United States and 10 days in Germany, said the World Bank report.

Modi’s administration is spending of over 10 trillion rupees ($120 billion) on infrastructure in the current fiscal year ending March, about one-third higher compared to the previous fiscal year.

“Our next aim is to improve our global logistics ranking, among the top 25 countries,” said Singh.

($1 = 83.2740 Indian rupees)

(Additional reporting by Shivangi Acharya; editing by David Evans)