The Indian logistics sector is expected to grow at 8-10 per cent over the medium term, domestic ratings agency ICRA said. “ICRA maintains a stable outlook for the Indian logistics industry, expecting it to grow at 8-10 per cent over the medium term,” the ratings agency said.
The demand growth would continue to be buoyed by pick up in industrial activity and consumption-led sectors while increasing preference for outsourcing logistics activities would provide further impetus to organised players,” it added.
Additionally, supply-side factors like improvement in logistics infrastructure and emergence of logistics start-ups would offer further impetus to growth, it said. Prevalence of trends like rising in integrated logistics, e-commerce logistics, investments in warehousing and penetration of technology in the sector, in tandem with the ongoing shift towards organised logistics players, would also induce a structural shift in the industry over the longer term, it added.
With industrial output and consumption-driven sectors recovering in the second half of FY18 from the initial lull post GST implementation, the freight demand in India has also reported healthy pickup during the said period, it said.
“The performance of key listed logistics companies indicates that there was pick-up in growth momentum as the year progressed. From an aggregate revenue growth of only 4.6 per cent in Q2 FY2018, the sample’s growth gained pace to 10.8 per cent in Q4 FY2018, as freight volumes picked up,” ICRA vice president and sector head – Corporate Ratings Shamsher Dewan said.
“Transporters also took advantage of the improvement in freight demand to pass on the increase in diesel prices to their customers during the latter half of the year, as against freight rate cuts undertaken earlier in the year, in light of weak demand,” Dewan said.
The implementation of GST also considerably impacted the functioning of domestic logistics sector — in terms of transportation time, preference for organised players and warehousing strategy employed by companies.
“ICRA estimates that there have been savings as high as 18-20 per cent in the truck turn-around time post the implementation of GST, supported by the elimination of inter-state check posts,” Dewan added. The implementation of E-way bill from April 2018 has also been received positively by the transporter community, with operational efficiencies and time savings realised on account of the same. Companies are also interacting with supply chain management companies in order to explore opportunities to redesign their warehousing network, Dewan added.