Logistics: Stitching The Narrative Of An Aatmanirbhar India

Self-reliance or popularly known as Aatmanirbhar— gained prominence when Prime Minister Modi expressed his intent to enable India to become a self-reliant nation.

For an independent economy that is developed in a multifarious and comprehensive manner, the development of heavy and light industries along with agriculture is the key to driving the self-reliant route. The logistics and freight industry aids this by forming the backbone of the economy in India as it ensures quick, efficient, and economical transport of goods across India and many commercial sectors rely on it.

The Aatmanirbhar Bharat Package was introduced with an aim to make the country independent against tough competition in the global supply chain. With an economic stimulus package worth Rs 20 lakh crores (USD 266 billion), the Abhiyan is based on the pillars of the economy, infrastructure, system, vibrant demography, and demand.

Stitching these pieces together is the logistics sector, helping all stakeholders revive the economy by enabling the movement of goods and services. However, it faces its own set of challenges. Understanding this sector’s crucial role, the government had earlier set plans to reduce logistics costs to less than 10% of GDP by 2022. The introduction of the Goods and Services Tax (GST) was a step in this direction.

The tax reform helped boost the movement of cargo more efficiently. Backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms, the implementation of GST enabled companies with small warehouses in several cities, to set up a few in specific regions, following the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets, and various POS.

However, the logistics industry’s transformation is incomplete without a more holistic outlook towards planning, coordination, and digitizing at grassroots levels (e.g., transporters raising invoices digitally).

The Road Less Taken

The biggest challenge faced by the logistics and supply chain industry is poor integration of transport networks, information technology, and warehouse & distribution facilities. Regulations exist; however, they differ from city to city, hindering the creation of national networks. A trained workforce is essential for the third-party logistics, manufacturing, and retailing sectors but is lacking. The sector is in a disorganized state in India.

The general perception of logistics being a manpower-driven industry and lack of adequate training institutions have created a crisis of skilled management and client service personnel. Poor facilities and management are reasons behind high levels of loss and stock damage, mainly in the perishable sector. Data from McKinsey suggests that inefficiencies account for the cost of Indian logistics to be 13 to 14 percent of GDP while in developed nations, they amount to 8 to 10 percent. More than half of all goods vehicles on the road own less than five trucks, and India’s modal mix is heavily skewed towards roads with 60 to 65 percent of transport happening via road compared to 25 to 30 percent in developed countries, prompting higher costs.

While supply chain reforms, a rational tax system, capable human resource, and a strong financial system is the need of the hour to make the Atmanirbhar Bharat Abhiyan a success, high logistics cost (double of international average), low R&D expenditure, skill mapping as well as quality and cost of power for the manufacturing industry are some major roadblocks for the logistics sector serving as its backbone.

From service providers to consumers, everyone needs to be on the same page. At the same time, we need multi-modal transportation to bring about a smoother transformation of the sector. Digitization of all trucking needs could help optimize value across the supply chain from transporters, shippers, and financers.

Striking The Iron While It’s Hot

“If India is able to work on upskilling its labor and providing logistics and transport infrastructure, it can immensely gain to establish itself in the global manufacturing space, which will not only lead to foreign investment on a huge scale but also will provide the much-needed impetus to the economy,” said a study by Ernst & Young.

Making SMEs more capable and competent, thereby reducing their dependence on MNCs, is the Atmanirbhar Bharat Abhiyan focus. To facilitate smooth operations within their limited size and lean operations, logistics partners will play a significant role in providing nationwide serviceability and technical innovation. Therefore, logistic platforms will need to take charge and virtually consolidate local logistics market-players to bring them under one roof and ensure a faster and broader reach.

This will empower the domestic companies; increase the demand within the home market; encourage mass-scale employment, and eventually lead to economies of scale. It will also open investment opportunities for adaptable and technology-enabled Indian logistics companies, as expressed by experts.