Nomura Research Institute (NRI) Logistics and Transportation in India Consulting & Solutions India Pvt
Total Page:16
File Type:pdf, Size:1020Kb
Nomura Research Institute (NRI) Logistics and Transportation in India Consulting & Solutions India Pvt. Ltd. Gurgaon Present and Future 21st November, 2019 Message from CILT India India is on the cusp of the 4th Industrial Revolution, which is going to positively impact the national economy in a structural way. However, full impact will be felt only after logistics and transport sectors upgrade their capabilities and services to align overall logistics costs with international benchmarks and contribute to make Indian business and industry globally competitive. The Logistics division under the Department of Commerce has been given the task to create an environment for an “Integrated development of the Logistics sector” by way of policy changes, improvement in existing procedures, identification of bottlenecks/gaps, and introduction of technology. Accordingly, the division plans to develop a National Logistics Information Portal, an online logistics marketplace that will bring together various Shri Shanti Narain stakeholders, viz. logistics service providers, buyers as well as central and State government agencies such as customs, DGFT, railways, ports, airports, inland waterways, coastal shipping etc., on a single platform. Chairman CILT India An effective and efficient logistics ecosystem is key to robust economic growth, with the potential to facilitate domestic and foreign trade, promote global competitiveness, encourage investments in the country, attract FDI, and drive the ‘Make in India’ initiative. Despite being a critical driver of economic development, logistics cost in India is estimated at nearly 15% of GDP. The sector continues to be highly unorganised, and the transportation mix is skewed with 60% of freight moving on roads. From the perspective of the logistics industry, there is an urgent need to improve the first-to-last mile connectivity to expand market access of all businesses, even farmers, MSMEs and small businesses; enhance efficiency across the logistics value chain through increased digitisation and technology adoption; and bring in standardisation for different segments (warehousing, packaging, 3PL players, freight forwarders). Greater integration of technologies such as IoT, blockchain, cloud computing, etc. will allow efficient and seamless movement of goods, which would equate into greater profits for the manufacturers as well as the entire logistics vertical. It has been a pleasure to have tied up with Nomura Research Institute as our Knowledge Partner. Their consulting experience in a multitude of fields including the logistics and transport sectors, has guided them to prepare an accurate feedback on these sectors. An event such as the CILT India Expo 2019 offers an excellent platform to the different segments of the logistics industry to congregate and discuss the issues/bottlenecks hampering their business. We encourage the industry to study, discuss and analyse this document in detail, and share the outcomes of these discussions for the industry leaders and the government to act upon and find solutions. Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 1 Message from the Exhibition India Group Government of India’s ‘Make in India’, ‘Digital India’ and ‘Skill India’ programmes are looking to give the country global recognition by developing a strong manufacturing infrastructure. Today, manufacturing has emerged as one of the high growth sectors, with the government looking to increase its share into the GDP to 25% by 2022. This can be achieved through consolidation of the core infrastructure, including logistics. The manufacturing industry based in industrial corridors and economic zones is highly reliant on the logistics sector to move goods and commodities domestically as well as for exports. The government has, therefore, increased investment in all segments of logistics and transportation, with special focus on the railways and roads. It is estimated that India has a high logistics cost at 14% of the GDP as compared to other nations such as Germany and United States, which Shri Prem Behl stand between 8-10%. Logistics systems and processes in the country are rife with inefficiencies and bottlenecks, wherein, timely reforms can save up to $50 billion a year. The government has already identified key issues pertaining to regulatory, infrastructure, skilling and standards Chairman that need to be looked into on a priority basis. Accordingly, the Ministry of Commerce is undertaking an analysis of the top 20 commodities by Exhibition India Group domestic and EXIM freight volumes to identify the inefficiencies in their transport and storage; and find solutions to ease the bottlenecks through regulatory streamlining and infrastructure development. In 2018, India moved up in the World Bank’s Logistics Performance Index ranking to 44th position. The government is focused towards strengthening the rail and road infrastructure to enable easy and faster movement of goods from one part of the country to the other. These and other reforms are expected to positively impact domestic trade and boost export of goods and commodities. Nomura Research Institute, the knowledge partner for the CILT India Expo 2019, has prepared a report that studies the existing logistics and transport industry in the country. Key features of the report include: Requirement for logistics and transportation; key industry drivers, stakeholders and major players; growth activity and market share, etc. The document explores the different aspects of the logistics industry and the trends and challenges impacting its progress. It also identifies the technologies that are influencing logistics and transportation, such as data analytics; logistics automation/Internet of Things (IoT); logistics-as-a-service; green logistics; hyperlocal transportation, etc. It is a matter of pride to be part of the CILT India Expo 2019 organising team. We encourage the speakers, exhibitors, delegates and visitors to take advantage of this unique opportunity to interact with industry stalwarts. I believe the transport and logistics industry has miles to go to make it competitive in the international market. This report highlights the drawbacks in the existing functioning and is a guide for the industry to upgrade itself technologically. Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 2 Message from the Knowledge Partner Logistics and Transportation, provides ‘Wheels to the Economy’. This ever growing sector globally has transformed from walking miles to deliver our parcels to a drone arriving at our rooftop. Today the sector is at the cusp of a major transformation, driven by technological advancements and Government policies. In this paper, we have addressed the key challenges that the sector faces, elaborated on the key trends that are influencing the sector and based on that, outlined a roadmap to create sustainable solutions in this sector. I hope the readers will find the information in this report insightful. I would also like to thank Exhibitions India Group & CILT for giving us the opportunity to prepare a report on this important subject. Ashim Sharma Partner and Group Head, NRI Consulting & Solutions India Pvt. Ltd. Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 3 Index 1 Overview of Logistics and Transportation in India 2 Modes of transportation and their operating model 3 Key trends in logistics and transportation 4 Major challenges for logistics and transportation in India 5 Way forward towards sustainable transportation 6 About NRI Consulting & Solutions Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 4 Index 1 Overview of Logistics and Transportation in India 2 Modes of transportation and their operating model 3 Key trends in logistics and transportation 4 Major challenges for logistics and transportation in India 5 Way forward towards sustainable transportation 6 About NRI Consulting & Solutions Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 5 Overview of Logistics and Transportation in India Logistics is the ‘lifeline’ of an economy; it drives the growth and efficiency of the nation as well as provides employment to millions and enables FDI influx Importance of logistics in economic and industrial growth • Robust logistics infrastructure is a key requirement for development as it makes it possible to Growth connect producers and consumers throughout the country Driver • Major economies such as Germany, Japan, China and US are also leading in World Bank Logistics Performance Index whereas India is 44th • Logistics sector has a multiplier effect across the economy, thus resulting in large scale Employment employment generation Generator • In India, more than 22 million people have jobs related to logistics activities Symbol of • Logistics efficiency is a strong determinant of the overall economic efficiency Efficiency • India spends 13%-14% of GDP on logistics costs whereas US and European nations spend ~8% and ~9% respectively A strong logistics setup fuels economic growth and the state of the logistics sector determines a country’s competitiveness on world stage Copyright(C) Nomura Research Institute, Ltd. All rights reserved. Source: World Bank, Make in India Website, MoRTH and UN Reports 6 Overview of Logistics and Transportation in India Indian logistics sector has grown rapidly, due to high economic growth, more spending on infrastructure, soaring domestic demand & impressive FDI inflow Economic Growth and Impact on Logistics Market 8.0 8.2