India's Logistics Cost Ranges From 7.8 - 8.9% Of GDP In FY22: NCAER Estimates

The logistics cost in India ranged from 7.8% to 8.9% of GDP in 2021-22, according to quick estimates of economic think-tank National Council of Applied Economic Research (NCAER).

Releasing the report on the logistics cost, Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Rajesh Kumar Singh said that the government has released a national logistics policy to reduce the cost and enhance competitiveness of Indian industry.

The department is also working to improve India's ranking in World Bank's Logistics Performance Index (LPI) from 38th at present to below 25.

"The kind of investment that India is making in both physical and digital infrastructure....all that is creating an enabling environment where we will start getting good and credible data, on the basis of which, we can do data-based planning and ultimately data based policy making as well," Singh said.

He added that through the report, a framework is being developed which will be used to calculate credible logistics cost estimates.

Singh said that the figures are calculated by NCAER on behalf of the government.

NCAER Professor Poonam Munjal said that these are quick estimates and going forward, by use of more granular data, these numbers will be refined further.

"These are ballpark numbers... and we prefer to keep them in ranges," she said.

At present, the government is going by certain estimates, suggesting India's logistics cost stands at about 13-14% of the country's GDP (gross domestic product).

Globally, there are different methodologies to calculate logistics costs at a macroeconomy level.

Capturing origin-destination (O-D) pair-wise, commodity-wise, geography-wise data is critical for accurate estimations. However, the current available non-official estimates of logistics costs (8% to 13% of the GDP) lack a conclusive and scientific calculation framework.

To align India's logistics costs with global benchmarks by 2030, a need was felt to develop a scientific logistics cost calculation framework, which is inclusive and stands the test of various statistical and data-based methods and then collect the data (primary and secondary) for analysis.

For this purpose, the secondary data sources published by the Ministry of Statistics and Programme Implementation (MoSPI), such as Supply Use Tables, and National Accounts Statistics, were used.

The Logistics Division of the Commerce and Industry Ministry has been actively engaging with national and international stakeholders, including academia and experts, to arrive at a robust and comprehensive framework.

In view of this, a Logistics Cost workshop was organised by DPIIT in collaboration with ADB on March 20 this year.

The emphasis was on convening leading experts worldwide with expertise in relevant areas to learn from international best practices for estimating logistics costs and charting out the way ahead.

As a way ahead, a task force was constituted. This task force is dedicated to developing a comprehensive framework for estimating logistics costs, including parameters/variables, data sources, approach, model for logistics cost calculation, and agencies to be onboarded.

The task force convened multiple meetings from March to September 2023, during which they identified the essential components of logistics cost estimation, along with secondary data sources, including transportation cost; warehousing and storage cost; auxiliary support services cost; packaging cost, insurance cost; and other administrative / operations cost. Logistics cost plays a key role in facilitating trade and enhancing the competitiveness of traders.