A recent report indicates that India's logistics costs are approximately 7.97% of the nation's Gross Domestic Product (GDP) for the fiscal year 2023-24. The study, conducted by the National Council of Applied Economic Research (NCAER) for the Department for Promotion of Industry and Internal Trade (DPIIT), marks the first comprehensive and scientifically derived estimate of logistics costs in India, utilizing a hybrid methodology that combines secondary data with nationwide surveys. This figure is significantly lower than the commonly cited estimates of 13-14% of GDP, which were often based on external studies or partial datasets, leading to inconsistencies and confusion among policymakers and global stakeholders.
The report, titled "The Assessment of Logistics Cost in India," provides a comprehensive framework by capturing logistics costs across different transport modes, product categories, and firm sizes. It also presents estimates of freight cost per tonne-kilometer and highlights the role of multi-modality in enhancing efficiency. The study estimated the aggregate logistics cost at ₹24.01 lakh crore at current prices for 2023-24. In addition to the logistics cost as a percentage of GDP, the report also estimated logistics costs as 9.09% of non-services output (agriculture, mining, and manufacturing). NCAER suggests that non-services output is a better measure to track logistics costs and to make sub-national and international comparisons.
The report highlights significant differences in cost-efficiency across various transportation modes. Rail logistics emerges as the most cost-efficient mode, with an average cost of ₹1.96 per tonne per km. This is significantly lower than road transport, which averages ₹11.03 per tonne per km. Air transportation is the most expensive mode, averaging ₹72 per tonne per km, which limits its use to high-value, time-sensitive commodities. Water transportation is highlighted as both cost-effective and environmentally friendly; however, India continues to rely heavily on road transport.
Several government initiatives are credited with contributing to the slowing growth of logistics costs in India. These include the PM Gati Shakti National Master Plan, dedicated freight corridors, the Sagarmala project, integrated check posts, and the development of the Unified Logistics Interface Platform (ULIP). These initiatives aim to reduce congestion, modernize infrastructure, and improve overall logistics efficiency. Integrated state and city logistics plans have also been launched in eight cities.
Despite the progress, the report identifies several challenges within the logistics sector. These include operational bottlenecks in railways, uncontrolled pricing for road transport, limited regional air cargo infrastructure, and seasonal variations in inland waterways. To further reduce costs and improve efficiency, NCAER recommends solutions such as Dedicated Freight Corridors, multi-modal logistics parks, modern cargo-friendly airports, automation, and GPS tracking. The report also notes that fuel, congestion, and over-reliance on trucking are major cost drivers, with fuel alone accounting for 42.1% of road freight expenses, exacerbated by steep diesel taxation and delays at toll plazas.
