Logistics Sector in India and Opportunities for Foreign Investors

Can you give a brief overview of India’s logistics sector?

Logistics sector in India is a USD 200 billion market, growing at a CAGR of 10.5%. India has the 2nd largest road network in the world and around 60-65% of transport takes place by road. National highways account for 2% of the total road network and carry over 40% of total traffic. India has a well-developed framework for Public-Private-Partnerships (PPP) in the highway sector. The government’s initiatives including big thrust on highways build up, Make in India, dedicated freight and industrial corridors, among others have potentially redefined the logistics sector in India.

What are the incentives provided by the government for road and highway sector in India?          

Some of the incentives provided by the government include:

• 100% FDI through automatic route
• Duty free import of modern high capacity construction equipment
• Capital grant up to 40% of project cost to enhance viability on a case to case basis

Can you list the key government infrastructure programmes?

• Industrial Corridors for industrial activity with planned greenfield industrial investment cities
• Dedicated Freight Corridors, high speed and high-capacity railway corridors dedicated for freight movement
• Bharatmala, a pan-India programme for the highways sector that focuses on optimizing efficiency of freight and passenger movement by bridging critical infrastructure gaps through development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads and Green-field expressways.
• Sagarmala Programme which focuses on port modernization, port connectivity, port-led industrialization, and coastal community development
• Logistics Efficiency Enhancement Program (LEEP), under which Multi-Modal Logistics Parks are being developed to enhance freight transportation and reduce time and cost.

What are the opportunities for foreign investors in the logistics sector in India?

• The roads and highways market is expected to record a CAGR of around 36% during 2016-2025
• India has the world’s largest railway network in terms of passenger traffic. The government has proposed to redevelop around 123 railway stations with world-class facilities.
• Under the Sagarmala Programme, USD 123 billion would be invested for port modernization and connectivity
• Policy support and the government’s massive push to infrastructure is expected to create more opportunities for investors. The government has allocated around USD 1.4 trillion for infrastructure to be invested until 2025.