Discuss the key challenges facing India’s logistics sector and suggest structural reforms required to make it resilient and sustainable in the face of growing climate and economic risks.

The logistics sector is central to sectors like manufacturing, agriculture, retail, and e-commerce. However, it faces mounting challenges from both economic inefficiencies and climate-related disruptions.

Importance of the Logistics Sector:

1. Economic Contribution: Accounts for around 13–14% of India’s GDP (NCAER, 2021–22).
2. Employment Generator: Provides jobs to over 22 million people across transportation, warehousing, packaging, and logistics services (CII, 2024).

Key Challenges Facing India’s Logistics Sector:

1. Fragmented Supply Chain:
   1. Dominated by small and unorganized players operating independently.
   1. Leads to under-utilization of capacity, duplication of efforts, and inefficiencies.
2. Regulatory Complexity:
   1. Multiple layers of taxation, compliance protocols, and bureaucratic red tape hinder seamless operations.
   1. Regulatory overlaps among central and state authorities create confusion.
3. Last-Mile Delivery Challenges:
   1. Poor rural road infrastructure, traffic congestion in urban centers, and inaccurate address mapping.
   1. Particularly problematic for e-commerce and rural supply chains.
4. Lack of Skilled Workforce:
   1. Shortage of trained professionals in areas like supply chain analytics, inventory management, and multimodal logistics operations.
5. High Emission Intensity:
   1. Road transport dominates, projected to grow 4x by 2050, worsening emissions.
   1. India is the 3rd largest emitter globally, and logistics contributes significantly to this footprint.
6. Cost Burden: Logistics costs in India are high—between 14–18% of GDP—compared to the global average of 8–10%, affecting the competitiveness of Indian goods.
7. Environmental Impact: Logistics contributes about 13.5% of India’s total greenhouse gas (GHG) emissions, largely due to overdependence on road freight (IEA, 2023).
8. Climate Risk: Climate inaction in the logistics sector could result in $35 trillion in economic losses by 2070 (Deloitte), equivalent to 12.5% of India’s projected GDP.

Structural Reforms Needed:

1. Multimodal Transport Shift:
   1. Promote a shift from road to rail, inland waterways, and coastal shipping to reduce cost and emissions.
   1. National Rail Plan aims to raise rail freight share from 27% to 45% by 2030.
   1. Projects like Bharatmala (road), Sagarmala (port-led development), and Dedicated Freight Corridors are crucial for integrated logistics.
2. Strengthening Digital Infrastructure:
   1. Platforms like Unified Logistics Interface Platform (ULIP) integrate 34 digital systems for real-time coordination.
   1. Use of AI, IoT, and predictive analytics to improve visibility, efficiency, and inventory management.
3. Decarbonization of Freight Movement:
   1. Promote electric vehicles, hydrogen fuel, liquefied natural gas (LNG), and biofuels for cleaner freight.
   1. Adoption of sustainable practices like the Indian Railways’ returnable jute bags can help.
4. Policy and Institutional Reforms:
   1. National Logistics Policy (2022) focuses on process simplification, service quality, and cost reduction.
   1. It aims to bring logistics costs to 8–9% of GDP and elevate India into the top 25 of the Logistics Performance Index by 2030.
5. Infrastructure Development:
   1. Development of 35 Multimodal Logistics Parks with an outlay of $6.2 billion with Investments in warehousing infrastructure 25% YoY increase in warehousing space absorption in 2024.
6. State-Level Coordination & Monitoring:
   1. Logistics Ease Across Different States (LEADS) index encourages healthy competition and helps identify regional bottlenecks.
   1. Data from LEADS and GST integration with ULIP can inform better decision-making.
7. EXIM Logistics & Global Integration:
   1. Improving export-import infrastructure through the Logistics Data Bank (100% container visibility) and port connectivity reforms.
   1. Projects like the India-Middle East-Europe Corridor (IMEC) can further enhance strategic trade routes and resilience.

Conclusion:

Delay in reform could derail India’s climate goals and inflate economic costs. With targeted investment, digital transformation, policy coherence, and global collaboration, India can turn its logistics sector into a competitive, green, and resilient engine of growth.

https://www.livemint.com/opinion/online-views/india-logistics-climate-change-supply-chain-resilience-decarbonization-electric-vehicles-road-freight-emissions-ghgs-11751775854442.html

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