A recent study by the Centre for Digital Economy Policy Research (C-DEP), in collaboration with IIT Delhi, reveals that technology-enabled goods transportation services are significantly reducing logistics costs and improving efficiency for Micro, Small and Medium Enterprises (MSMEs) in India. The report, titled “Study of Technology-Enabled Intra-City Logistics for MSMEs,” was released at the India Habitat Centre in New Delhi.
The study highlights the critical role of app-based goods transportation services in streamlining MSME operations by lowering costs, enhancing reliability, and accelerating deliveries. It is based on interviews with MSMEs and tech-enabled logistics providers, along with an analysis of aggregated platform data.
Key findings from the report indicate that 73% of surveyed MSMEs have experienced lower transportation costs, while 95% reported improvements in on-time deliveries. Furthermore, approximately 27% of these businesses have expanded their customer reach due to the accessibility of on-demand logistics services. The increased speed of vehicle availability and access to appropriately sized vehicles allows businesses to fulfill more orders daily without needing to invest in their own vehicle fleets.
The report also brings attention to potential policy risks that could undermine these advancements. Specifically, it warns that the Goods and Services Tax (GST) 2.0 could lead to a misclassification of digitally booked goods transport services as "Local Delivery Services," potentially increasing the GST rate from 5% to 18%. This tax hike could raise per-trip logistics costs by over 12%, disproportionately impacting MSMEs with narrow profit margins and potentially pushing them back toward informal transportation options.
MSMEs contribute nearly 30% of India's GDP and around 45% of the country's industrial output. However, they face persistent challenges in intra-city goods movement, including high transport costs, unreliable vehicle availability, and delays. Tech-enabled platforms are helping to address these issues. Business users account for about 71% of the users of tech-enabled goods transportation services, but contribute nearly 97% of all intra-city goods transportation orders across two-wheeler, three-wheeler, and four-wheeler vehicle categories.
Jaijit Bhattacharya, President of C-DEP, noted that a significant portion of logistics costs within road transport comes from intra-city movement. He emphasized that technology-enabled goods transport services are providing clear benefits to MSMEs by reducing costs, improving time efficiency, and increasing reliability. Bhattacharya cautioned that higher taxes could make these services unaffordable, depriving MSMEs of an important efficiency tool and weakening customer trust.
Praveen Khandelwal, Member of Parliament and Secretary General of the Confederation of All India Traders (CAIT), who released the report, stated that lowering logistics costs is central to India's ambition of becoming a developed nation. He pointed out that road transport accounts for a major share of logistics expenses, and improving efficiency in intra-city and road-based logistics will be essential if India is to bring overall logistics costs down to 4–5% of GDP. Ashwini Mahajan, Co-Convener of Swadeshi Jagran Manch, highlighted the broader role of technology in strengthening India's economic backbone, adding that MSMEs have demonstrated their capabilities across sectors with the support of digital tools.
