India needs to cut logistics cost to 7-8% of GDP

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SME Times News Bureau | 22 Dec, 2020
There is an urgent need for India to lower its logistics cost to 7-8 per cent of the GDP, according to a report by Confederation of India Industry (CII) and Arthur D. Little.

It recommended a 20-25 per cent reduction in indirect costs.

The report noted that the current logistics cost of India is 14 per cent of GDP, while in the US and Europe, it ranges between 8-10 per cent. India's supply chain and logistics sector is one of the largest globally, with a logistics industry of $215 billion, growing at a CAGR of 10.5 per cent.

It suggested that the logistics modal mix should be enhance with roads constituting 25-30 per cent, railways comprising 50-55 per cent, and waterways accounting for 20-25 per cent. It also said that the cold chain storage infrastructure should be expanded.

However, despite its size and criticality to economic growth, India's supply chain faces several barriers to growth, notably an unbalanced logistics modal mix, high indirect costs, fragmented infrastructure and networks, and limited technology adoption, it noted.

"To bridge the current competitiveness gap of $180 billion, India needs to halve logistics cost from 14 percent of GDP to 7 per cent," said Barnik Chitran Maitra, lead author of the report and Managing Partner of Arthur D. Little India and South Asia.