RBI recognizes development of ports and logistical services inclusive to the growth of the economy

RBI in its recent monitory policy has clearly stated that increase in capacity of ports is integral to the growth of the economy.It also recognizes development of infrastructure, including ports, roads, and railways as a positive sign of economic revival in the past few years. Statistically, the government has already added more than 20 per cent capacity across the 13 major ports over the last two years from a capacity of 800 million tonnes in the year ended March 2014 to 965.3 million tonnes by March 2016 (according to an Indian express report).

Logistical growth also directly supports the government’s objective of ‘Make in India’, which targets growth in exports and overall good of the economy. As a result of focus on growth in the manufacturing industry in India, there are many economic reforms, taking shape in India. This is in order to boost trade between two nations, making logistics industry growth more imminent.

Mr. Brijesh Lohia, Managing Director of Global Ocean Group said that, “to further develop an increased capacity of transporting goods on ports, it is important to have a holistic view on infrastructure.

The prime point here is co-development of roads and railways-the connecting point for transporting goods to the final destination from the ports. As a logistics service provider, I can understand the need to provide deeper connectivity, even to the hinterland areas in India. Then only, we can be sure of procuring the goods and other manufacturing items to export. It is simple economics- convenient and quicker transportation of manufactured items from its source destination to the ports-will only further increases the capacity to transfer goods out of India.”

He further adds, “Investments in developments of infrastructure at ports, creating freight corridors and national highways, better railway network, will continue to play a vital role in growth of the economy.” Logistics industry in India will continue to play an important role in India, directly because of the rapid growth in e-commerce industry also. A dependable and more efficient logistics system can also bring a reduction in cost of transportation; thereby, contributing to the growth of the economy. According to the survey conducted by the Transport intelligence in 2013 ranks India as the second most attractive logistics market in the future after China.

In India, about 110 new logistics parks are expected to be operational with an estimated cost of USD 1 Bn. Hence, India offers huge opportunities in development of logistics services, infrastructure and multi modal transportation, etc.

According to Assocham, India spends around 14.4% of its GDP on logistics and transportation as compared to less than 8% by the other developing countries. Indian freight transport market is expected to grow at a CAGR of 13.35% by 2020 driven by the growth in manufacturing, retail, FMCG and e-commerce sectors.

Freight transport market in India is expected to be worth US$ 307.70 billion by 2020. In India Road Freight constitutes around 63% of the total freight movement consisting of 2.2 million heavy duty trucks and 0.6 million light duty trucks annually.

The road freight movement is expected to increase at a CAGR of 15%. The Sea Freight consists of around 9% of the total freight market and is mainly used as a major mode for imports and exports. The air freight consists of around 1% of the total freight market in India which will grow around 12.5% CAGR over the next 5 years.