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Demand pickup, infra creation to grow logistics sector
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SME Times News Bureau | 24 Oct, 2021
A pick-up in demand along with reforms and construction of support
infrastructure is expected to grow India's logistics sector by 10-12 per
cent CAGR.
At present, India's logistics market is pegged at $250 billion.
The growth is expected to be supported by the shift from organised to the unorganised sector (90 per cent currently).
According to Motilal Oswal Financial Services, the demand for value added services is also on the rise.
"Most logistics spends are towards transportation, followed by warehouse."
"Based
on the reforms undertaken over the last few years, the industry is
expected to grow faster over the next few years. Some new business
models like '3PL' and 'Express Logistics' would grow faster than the
overall sector."
Accordingly, the brokerage house said that
driven by reforms such as GST and the construction of support
infrastructure will shift the perspective of logistics from just
transportation to a specialised function.
"The transport industry
is highly unorganised with several small local fleet operators. With
GST taxing all levels of value added, the industry would gradually move
towards formalisation."
"The higher levels of compliance with
GST, along with the reduction in cost competitiveness, would result in
smaller players moving out of the system and market share moving towards
organized players."
Besides, it predicted that organised
players, with large warehousing capacity and the ability to invest would
see strong market share gains going forward.
Furthermore, it said that e-commerce and organised retail sector has accelerated the growth of '3PL' market in India.
This
segment was largely dominated by the automotive sector, wherein, there
is a heavy requirement for warehousing and transportation.
In the
past few years, the '3PL' segment is estimated to have clocked over 20
per cent CAGR, with increasing customer adoption and more players
entering this space.
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