Finance Minister Nirmala Sitharaman will present the Union Budget on February 1 at Lok Sabha. Being an election year, Sitharaman will present an interim budget instead of a full one. Despite being an interim budget, industry leaders have come up with specific suggestions as per their requirements from Budget 2024.
The logistics sector which was valued at USD 274 billion in 2022, was estimated that this market would grow to 563 billion dollars in 2030, at a compound annual growth rate of 9.4%. India has a higher logistics cost as a percentage of GDP at 14%, compared to the BRICS average of 11%, and with the country setting its sights on being the global manufacturing hub, the logistics sector will need attention.
The interim budget is anticipated to introduce proactive measures, creating an enabling ecosystem for the integrated growth of logistics and manufacturing.
Focus on logistics technology
The government has advanced multimodal projects like road construction, railway enhancement, dedicated freight corridors, and air/water connectivity to accelerate the growth of the logistics industry and fortify essential infrastructure. However, there is a pressing need to expedite the growth of the logistics industry and develop the right infrastructure in India, says Ashvini Jakhar, Founder & CEO, Prozo.
“Attention now must shift towards the development of logistics technology. The future of logistics will be shaped by the efficiency, resource optimisation, and resilience of our supply chains. Therefore, it is imperative to extend support to the companies engaged in the development of integrated supply chain facilities, including warehouses, green last-mile delivery networks, and innovations like AI-powered Supply Chain Management (SCM) solutions. This strategic focus will not only propel the industry forward but also position India as a global leader in logistics and supply chain excellence,” says Jakhar.
According to Jakhar, by promoting connectivity through multimodal transport facilities and encouraging last-mile delivery solutions provided by private sector SCM companies, one can not only reduce the cost of logistics, and make the industry globally competitive but also diminish the carbon footprint of the transportation sector in India.
Bolster global manufacturing
Thanks to the flourishing e-commerce market and technological advancement that has accelerated the Indian logistics industry’s growth.
“The industry has progressed from a transportation and storage-focused activity to a specialised function that now encompasses end-to-end product planning and management, value-added services for last-mile delivery, predictive planning, and analytics, among other things,” says Ratheesh D, Director, CABT Logistics- First Mile, Mid Mile & Last Mile services.
In the upcoming 2024 budget, Ratheesh wants the government to emphasise bolstering global manufacturing, positioning India as a viable alternative to China. “This strategic move is set to propel significant growth in the logistics sector. The government has initiated substantial infrastructure projects with a specific focus on fortifying logistics. Effective budgetary strategies, including financial incentives coupled with investments in infrastructure projects to reduce logistics costs, are crucial,” adds Ratheesh.
India is targeting to be a viable alternative to China as a manufacturing hub. This means that the logistics sector will also be witnessing increased growth and progress. Hence the budget should focus on significant strides in global manufacturing.
The government has launched substantial infrastructure development projects such as PM Gati Shakti and the National Logistics Policy, with a specific focus on strengthening the logistics sector. These initiatives are viewed by the industry as crucial steps towards positioning India as a central hub for manufacturing. Also, the government increased the capital investment outlay by 33% to Rs 10 lakh crore in budget 2023-24, to build infrastructure and strengthen India’s position in the global supply chain.
“Besides, the government needs to implement effective budgetary strategies, including the provision of financial and regulatory incentives such as Production-Linked Incentive (PLI) schemes, alongside investments in infrastructure projects aimed at reducing domestic logistics costs, remains pivotal. Enhancing the overall efficiency of India's supply chain, particularly through improvements in transportation infrastructure, is imperative. The budget, we hope will include proactive measures to create an enabling ecosystem for logistics and manufacturing,” says Vishal Jain, Co-founder, Roadcast- End-to-end supply chain management solution provider.
FedEx wants a strategic allocation towards infrastructure development for more efficient multimodal logistics. Additionally, they emphasise a focus on digitization in the logistics sector to accelerate speed and ease of doing business.
“Recognizing the impact of the National Logistics Policy and PM Gati Shakti National Master plan, alongside prioritising road, sea, and rail cargo infrastructure, we see the expansion of airports as exciting avenues for growth. We urge a consistent budgetary emphasis on expanding airport infrastructure for cargo, strengthening regional airports, and developing dedicated transshipment hubs to optimise belly and freight capacities. We underscore the importance of digitally advancing customs clearance processes through cutting-edge technologies such as artificial intelligence, machine learning, blockchain, and big data. This approach promises improved risk management, compliance, efficiency, and analytics,” says Kami Viswanathan, President – MEISA, FedEx Express.
Besides, Viswanathan also anticipates budget initiatives that will sustainably boost manufacturing and trade, particularly benefiting and incentivizing SMEs. Initiatives towards greater trade facilitation and further fostering a business-friendly environment aligning with the USD 5 trillion economy goal is also anticipated.