India's Logistics Costs and the National Logistics Policy

Moving goods from factories to ports, warehouses and shops is a big part of a product’s cost. For years, India’s logistics were considered slower and more expensive than competitors’, hurting exporters.

How costly?

Estimates have varied widely. A 2023 study by the research body NCAER estimated India’s logistics costs at around 8 to 9 percent of GDP, lower than some earlier estimates of 13 to 14 percent but still significant.

Why costs were high

• Heavy reliance on roads: trucks carry most freight, though rail is cheaper for long distances.
• Congested railways: freight trains shared tracks with passenger trains and were slow.
• Delays at checkpoints and state borders before GST.
• Fragmented warehousing and limited cold storage.
• Paperwork and slow port processes.

Reforms

• GST in 2017 removed many state border checkpoints, and e-way bills reduced paperwork, speeding truck journeys.
• Dedicated freight corridors: separate railway lines for freight. The Eastern corridor from Punjab to Bihar and much of the Western corridor to the Mumbai area have become operational, allowing faster, heavier freight trains.
• PM Gati Shakti, launched in 2021, a national master plan using digital maps to coordinate infrastructure across ministries.
• National Logistics Policy, launched in September 2022, aiming to cut costs, improve rankings and create a unified digital logistics platform.
• Port improvements and faster customs clearance.

Why it matters

• Exports: lower logistics costs make Indian goods more competitive.
• Manufacturing: firms can locate factories further from ports.
• Food: better cold chains reduce waste.
• Consumers: lower costs can mean lower prices.

Measuring progress

India’s rank in the World Bank’s Logistics Performance Index improved to 38th in 2023. Port turnaround times fell significantly.