The Indian logistics sector was a rising star in 2022 and is expected to continue to shine in the years to come. Investment Information and Credit Rating Agency of India (ICRA) estimates that the sector will develop at a compound annual growth rate (CAGR) of 10.5% through 2025 after growing at a CAGR of 7.8% over the past five years.
While e-commerce and pharmaceutical companies kept the wheels turning for the logistics industry in 2021, 2022 was a year of transition and making its way towards its true potential. The first half remained challenging in the light of residual effects of the Covid-19 pandemic, volatile fuel prices and semiconductor chip supply shortages. The back half of the year was all about reclaiming lost ground.
“There was a lot of pent up demand from the last two years which got serviced during this year and overall the consumption and the demand has been quite strong,” said Pranav Goel, founder and chief executive of Porter.
The logistics sector rides on growth of the manufacturing sector. The higher the production, the more the goods to be transported, auguring better the growth of the logistics businesses in the country.
While the e-commerce segment went well above the pre-pandemic levels in terms of sales, categories such as durables and FMCG have just about levelled bases, said Rampraveen Swaminathan, Managing Director and CEO, Mahindra Logistics. Demand for commercial vehicles continues to be soft.
Some trends that stole the limelight include large-scale digitisation, increasing adoption of electric vehicles in the two-wheeler and three-wheeler segments, and evolution of new models of commerce.
Industry giants have increasingly added two-wheeler and three-wheeler electric vehicles to their existing auto fleets. “Below one-tonne (vehicle) market and the intra-city market has seen increasing adoption (of electric vehicles),” said Swaminathan, adding that what the industry needs now is better and larger products to serve the beyond one-tonne market.
While Porter has added close to 4,000 electric vehicles on its platform in the past year, Mahindra Logistics aims to electrify 100% of its last mile fleet by 2026. Gati’s pickup and delivery on the other hand will be on alternate fuel by 2025.
With a digitisation push, newer modes of commerce such as two-wheeler pick and drop services were also in higher demand in 2022. “This year was a breakout year where two-wheeler services have become the mainstay for a lot of urban movement of parcels which are less than 20 kilograms,” Goel highlighted.
On the flip side, overall demand appeared to be softening in the last quarter of 2022 owing to inflationary pressures, he added. Challenges that continue plague the industry include lack of infrastructure, procedural inefficiencies and inflation.
The Modi government undertook a slew of policy measures to boost the logistics ecosystem in the country, in the form of PM Gati Shakti, Open Network Digital Commerce and the National Logistics policy (NLP), however, it may be a while before private players can realise benefits on ground. “In the next 18 to 24 months, it will be substantially visible,” admitted Pirojshaw Sarkari, CEO, GATI Ltd.
Industry insiders also highlighted a continued shortage of drivers as a significant impediment facing the sector. Swaminathan called it a socio-economic issue, with less people coming into the profession. “Also there is a sudden shortage of drivers in the US and Europe and they are looking to source from countries such as India,” added Sarkari.
Moving forward, all stakeholders continue to hold an optimistic outlook for the sector in 2023. “FY 2023-24 is going to be the most stable period we would have seen in some time,” said Swaminathan, emphasising that it is going to be a period of growth and stability. “We believe last mile transportation in the long run will be electric,” Saminathan said, adding that tech upgradation will become a bigger and bigger task for the industry in times to come.
Deccan Herald is on WhatsApp Channels| Join now for Breaking News & Editor's Picks