According to a recent report by Motilal Oswal, the Indian logistics market, which was worth Rs 9 trillion in FY23, is expected to grow significantly to reach Rs 13.4 trillion by FY28, at a compound annual growth rate (CAGR) of 8-9%.

This growth is being driven by structural shifts, technological advancements and government initiatives aimed at reducing logistics costs and improving infrastructure. The National Logistics Policy, launched in September 2022, aims to optimise India’s logistics framework, with a focus on increasing railways’ share of freight transport – currently 18% – through developing dedicated freight corridors (DFCs), improving road infrastructure and expanding inland waterways.

By April 2024, the commissioning of DFCs will be 96% complete and is expected to improve the capacity and efficiency of rail freight, increasing its share in the overall logistics mix. Moreover, the government’s push for privatisation of ports has improved infrastructure and efficiency at Indian ports, benefiting major operators such as Adani Ports and SEZ (APSEZ) and JSW Infrastructure.

Currently, India’s logistics costs stand at 14% of GDP, significantly higher than the 8-9% seen in developed countries. The skewed modal mix, with road transport accounting for 71% of freight movement, contributes to these increased costs, while railways and waterways account for a smaller share.

To address these inefficiencies, the government has implemented major initiatives such as the Goods and Services Tax (GST) and has invested heavily in road infrastructure, inland waterways and DFCs. These measures are aimed at reducing the logistics cost-to-GDP ratio to 8-9% in the coming years, thereby aligning India with global standards.

The logistics sector is highly diversified and includes road transport, rail transport, air freight, multimodal logistics and industrial warehousing. The domestic express logistics segment is expected to grow even faster, with a CAGR of 14% over FY23-28, largely driven by the expansion of e-commerce.

Organized players, who currently hold about 80% of the market, are expected to strengthen their dominance by leveraging government policies like the e-way bill and GST. Moreover, the less-than-truckload (LTL) segment in road transportation is also expected to grow, with an expected CAGR of 10%, driven by rising demand for smaller and more frequent shipments that bypass warehouse storage to reach retailers directly.