India pegs its logistics cost lower than China in terms of percentage of GDP

The Department for Promotion of Industry and Internal Trade (DPIIT) has cited a report estimating India’s logistics cost at 7.97% of its Gross Domestic Product (GDP) in FY 2023-24, compared with 24% for Indonesia and 8% for South Korea. In 2023, China had estimated its logistics cost at 14.4% of GDP.

The report referred to by the DPIIT, “The Assessment of Logistics Cost in India”, was prepared by the National Council of Applied Economic Research (NCAER). It represents the country’s first scientifically derived estimate on the subject, using a hybrid methodology combining secondary data with nationwide surveys.

It notes that air logistics is over 36 times costlier than rail logistics, which continues to be the most cost-efficient mode, at an average cost of ₹1.96 per tonne per km. In comparison, road logistics costs ₹11.03 per tonne per km, while air logistics, though fastest, is the costliest at ₹72 per tonne per km. Logistics costs for non-services sectors, including agriculture, mining, and manufacturing output, are around 9.09%.

The DPIIT added that until now, logistics costs in India were misrepresented, with commonly cited figures of 13–14% of GDP derived from external studies or partial datasets. This led to inconsistent estimates, causing confusion among policymakers and global stakeholders.

The report noted: “An assessment of average cost per tonne per km of cargo transported by rail reveals that product categories such as iron ore, coking coal, pig iron, coal briquettes, petrol, flat iron and steel, iron ore pellets, and non-coking coal entail higher costs than the overall average of ₹1.96.”

This is due to the movement of heavy and high-volume commodities, which require specialised wagons, bulk-handling infrastructure, longer handling time, safety protocols, and other infrastructure or operational measures, especially for sensitive cargo like petrol and other hydrocarbons.

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Proposed recommendations include the creation of Dedicated Freight Corridors to reduce congestion, upgrading and modernising railway infrastructure, technological innovations such as GPS tracking and automation for safety, security, and loading/unloading of cargo; adoption of green energy or fuel-efficient vehicles; dedicated truck lanes and freight consolidation centres; multi-modal logistics parks; modern cargo-friendly airports in non-metro cities; deeper and wider navigation channels to ensure year-round river navigability; and multi-modal terminals for seamless integration with rail, road, and sea transport.

The report further analysed estimates from the previous five years, showing a gradual slowdown in logistics cost growth, attributed to initiatives such as the PM Gati Shakti National Master Plan, Dedicated Freight Corridors, the Sagarmala project, integrated checkposts, and the development of the unified logistics interface platform.

(Edited by : Sheersh Kapoor)

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