Logistics in India

Despite its favorable location between Asia and Europe and a population of more than 1 billion people, India has hardly been able to position itself on the economic market. It has only been in recent years that the country has been able to increasingly flex its economic muscle. But, India has much catching-up to do in logistics terms before it can reach the same level as the world’s leading industrial nations.

 

Geographic challenges in India

India is bordered on the north by the Himalaya Mountains. For this reason, creating road and rail connections from this direction is a major undertaking. In the south, though, the Indian peninsula is well suited for sea harbors. India is indeed the country with the world’s second-largest population. But the population is unequally distributed, creating a major challenge for logistics service providers.

Core countries for trade

The most important export countries for Indian products are the United States, the United Arab Emirates, China, Singapore and Great Britain. The biggest import trading partners are China, the United States, Switzerland, the United Arab Emirates and Belgium.

Indian infrastructure

A vital step in India’s further development is expanding the road and rail networks, and modernizing harbors and airports. In the process of globalization, which is expanding India’s position in world trade, transport volume has climbed rapidly in recent years. The expansion of the logistics infrastructure has been unable to keep up with this pace. For this reason, transport capacities have already reached their limits.
The transshipping times for ships in Indian harbors are three to four times longer than the average time in the West. Logistics costs are also very high in international comparison because of the poor infrastructure. For this reason, India will have difficulties positioning itself as a global logistics hub in years ahead.
Road transport is especially important for India’s transport system. After all, India has one of the world’s largest road networks, with a total length of 3.3 million kilometers. But much of this network does not meet Western standards. For instance, a truck takes five to six days to cover the 2,061-kilometer-long route between Bangalore and Delhi. The government is indeed trying to introduce counter-measures and shift freight transports from the roads to the rails. But, first, the rail infrastructure must be expanded and the connections to harbors and airports improved.
Many sub-areas of the 63,000-kilometer-long rail network still use the technology of 1947, the year that British colonialists left. Only about one-quarter of the routes are electrified. One other challenge is the four gauge widths used in the rail network.

Logistics requirements and service areas

Road transports are characterized by small forwarders who frequently use antiquated technology. In addition, the splintered political structure requires an excellent understanding of local conditions.
As national highways in India are built and road transports are increasingly liberalized, the productivity of road shipping will rise in years ahead. The network business with LTL [Less than truck load] in India has excellent potential. The Indian road-transport market is forecast to rise to $40 billion by 2012 - it is currently $28 billion.
The CEP market Courier, express and parcel services on the subcontinent is growing rapidly. In the last five years, revenue has experienced double-digit growth, climbing to about $650 million. Its share of the entire logistics market totals only about 3 percent. International service providers are working to set up or acquire domestic networks in India.
Logistics service providers have been focusing more extensively on traditional storage functions and distribution. But the number of high-bay warehouses that meet European standards is extremely small. Typical added-value services that meet Western standards also are hardly offered. For this reason, the contract logistics market in India has a share of only about 6 percent of the entire logistics market.

Logistics centers in India

In terms of logistics, India remains a developing country in many areas. For instance, it has hardly any multimodal logistics centers. Despite its good geographic position, India has also been unable to evolve into a hub for international freight transports, like Dubai.
In regional terms, India lags behind logistics centers like Singapore, Thailand and Hong Kong. Currently, India is moving forward with a plan to turn the country’s 12 main harbors into integrated freight hubs. Many of these harbors do not have the rail and road connections needed to handle the transport volume of ships. Containers frequently sit for weeks in the harbor before they can be transported.

Important logistics service providers

The largest Indian logistics service providers are Shipping Corporation of India, Container Corporation of India, Great Eastern Shipping, Reliance Ports / Terminals, Essar Shipping, Transport Corporation of India, Reliance Logistics, Blue Dart Express, Varun Shipping Company and BLR India. International service providers are Schenker, DHL, Arvato, Kühne & Nagel and TNT.

Recommended reading

Fundamentals of Logistics Management | Grant / Lambert / Stock / Ellram 2005

References

The World Fact Book | Central Intelligence Agency 2007
Indien | Alex 2006. In: Transport und Logistik | Bundesagentur für Außenwirtschaft (Hrsg.)
Stückgut steckt noch in den Kinderschuhen | Jahncke 2007. In: DVZ 61(2007)122
DVZ Sonderbeilage - Indien | 2006. In: DVZ 60(2006)58
Indien boomt, ist aber kein zweites China | Gillies 2006. In: Logistik Inside 6(2006)5

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