National Logistics Policy will drive India’s Next Economic Growth Curve

The logistics sector expects the National Logistics Policy to address its problems, improve India’s trade competitiveness, and open up more investment opportunities. They believe that if properly carried out, the strategy can usher in a technologically equipped ecosystem with optimized resource utilization, enhanced connection, and last-mile delivery, increasing total productivity.

With an estimated $215 billion market value and a CAGR of 10.5%, the logistics sector is considered to be the backbone of the Indian economy. Also, the sector employs about 22 million people directly and indirectly. This industry faces many challenges, including a high order intensity ratio, an increased tax structure, and expensive supply chain issues.

Based on the logic of this argument, the larger the degree of economic activity, the greater the requirement for adequate transportation to ensure that items are delivered via international parcel services to their appropriate locations. As a result, there is a need for better transportation and logistics systems. This causes a rise in demand, and the multiplier effect begins to work, causing the GDP to increase. Greater demand indicates that a country’s available factors of production have been exceeded, at which point it begins to trade with other nations to obtain the limited resources it requires.

Transportation and competition

The National Logistics Policy’s goals are to increase India’s trade competitiveness, create more jobs, and make conducting business easier, all of which will help India establish itself as a logistics hub. By reducing procedures with technology and digitization, the implementation of the strategy would result in a paradigm shift in the logistics sector. This policy will assist in integrating the supply chain and illustrate inter-ministerial cooperation.

A state’s economy may have a competitive advantage over the economies of other countries thanks to transportation services and supporting infrastructure. The US rail freight sector is a prime example of a competitive advantage in transportation. Due to our low bridges, containers cannot be placed on trains in the UK. American trains don’t have any height limits or low bridges; thus, they can be stacked two containers high. As a result, they have a competitive advantage over nations with weak bridges. Compared to countries without railways, such as the majority of Africa and South America, the US enjoys a clear edge.

Excluding Transportation from GDP

It is impossible to anticipate continued growth in the GDP and transportation activity. There must be a marginal utility point at which a further development unit has no impact on GDP.

Other non-economic variables that will disconnect transportation activity from GDP development include pollution and traffic congestion. Nobody expects all land to be used for roads and other logistics infrastructure, and land usage might negatively impact the environment.

Last, since more efficient transportation is less expensive, GDP should increase faster than transportation due to increased productivity and economies of scale, showing that the relationship between transportation and GDP has been broken.

Demand- or supply-led?

Finally, they should decide whether the rise of transportation and logistics services is driven by demand or supply. Why is this essential? Logistics designers need to know whether the increase in transportation capacity is caused by growth that has been created, or if it is caused by other factors.

Supply-led

The growth that is sparked by these activities is supply-led. Government and private sector investments in transportation and logistics infrastructure will increase the ability to produce goods and services, increasing demand. Governments frequently take this action to boost economic growth: They invest in infrastructure. Increased transportation, logistics, and associated infrastructure facilitate economic development. Better transportation facilities enhance access to additional markets, and as the efficient vehicle is not expensive, it is also used more frequently. The local economy will be indirectly impacted by large-scale transportation infrastructure developments, as the multiplier effect supports the expansion of logistics companies.

Demand-led

Demand-driven growth could be more predictable. Demand for transportation is driven by investments in overall economic development or by consumers. Transportation services can only be economically viable if there is a demand for them, which is different from supply-led growth, which focuses on growing transportation and logistics capacity. Latent and disclosed demand are two possible sources of demand. Actual goods movement, or people’s desire to move more objects, serves as the foundation for revealed demand. Latent demand is the potential unmet demand that results from insufficient transportation infrastructure. If a retail park is created outside of a town, that is an example of latent demand; the demand is present after the project is built.

Conclusion

According to the stakeholders, the national logistics policy will introduce a new approach to the nation’s International courier services environment, increasing the efficiency of supply chains. The newly developed policy, according to logistics software providers, will enable a modal shift in logistics away from the current excessive on roads (over 60% share vs 25% internationally) and toward trains (30% share vs about 60% globally) and waterways, which currently make up 5% of the modal mix.

To sum up, NLP is a big step in the right direction, and the industry is already seeing more local and foreign money coming in. Moreover, the program would boost investment, promote innovation, and raise industrial competition.