Logistics is considered an apt barometer to understand the health of an economy. Its pivotal role — and its weak spots — was on display during the two pandemic-ridden years, especially when it swung into action to deliver oxygen cylinders and vaccines in every corner of the country. The outlook for the industry in India is promising in 2022, say stakeholders.
The government is focusing on building infrastructure now and as the economy opens up, logistics would find this a good runway to take-off, reported the Economic Times.
The sector has had an eventful 2021. Manufacturing activity opened up, resulting in increased demand for logistics services, particularly after June. Globally, supply chain disruptions chained down the logistics sector, and this situation might not get resolved quickly.
Despite that, the logistics sector in India reported a strong recovery in H2 FY2021, with a growth of 9% sequentially in Q4 FY2021. This was in sharp contrast to the steep decline in revenues and earnings reported over Q12021, says rating agency ICRA.
The year 2022 will be buoyant for logistics, says Suresh Kumar, CEO, Allcargo Logistics Ltd. “The learnings from the lockdown year of 2020, the focus on building resilience, the rise of e-commerce, acceleration of digital, new technology adoption and green logistics will power the sector in 2022 and beyond. The disruptions in the supply chain caused by imbalances on many fronts will gradually ease. With continued government emphasis on ease of doing business and initiatives like Gati Shakti, massive investments in infrastructure, emphasis on public-private partnerships the sector is set for rapid growth,” he says.
D2C to be the next bastion for growth
The pandemic has accelerated demand for e-commerce and D2C (direct-to-consumer) businesses. Tech-based logistics firms are already assisting e-commerce and D2C firms to execute smooth supply chain and last-mile delivery operations at low costs. India has over 800 D2C brands, and the sector was worth US$44.6 billion in 2021 and is projected to touch US$100 billion by 2025, says KPMG. Experts say this means the next wave of growth for logistic firms could come from the D2C segment.
In 2022, logistic companies will adopt the latest technologies and experiment with visionary ideas like artificial intelligence and machine learning, says Kushal Nahata, CEO & Co-founder of logistics platform FarEye. With the help of these AI-based tools, Nahata affirms, firms will achieve proactive and predictive visibility, giving them a competitive edge.
“Besides, there will be a growth of autonomous vehicles that will eventually become the future of the logistics industry, reducing costs and environmental damage and increasing efficiency by automating delivery packages,” he says.
All the optimism aside, one question that has started haunting logistics firms is will the Omicron variant make a dent in the sector’s revival and prospects. The information available currently indicates most Omicron cases are asymptomatic and require significantly lower hospitalisation among vaccinated people. Can that make the stakeholders hopeful?
While the Omicron variant may affect global supply chains, the variant is unlikely to stop the sector’s revival. The fundamentals of India’s economy centre around domestic demand and e-commerce enabler infrastructure continue to be strong. Also, the players in the ecosystem are likely to handle any temporary disruptions better now than how they did it in March 2020, a business owner says.
As the sector heads into the new year, stakeholders have also highlighted the need to address key bottlenecks that might derail their growth plans in 2022. These issues have a bigger bearing on smaller logistics players, especially the SMEs.
Experts also say the quality and quantity of logistics infrastructure and services need to improve and this needs to be done for the long haul. They also want India’s logistics cost as a % of GDP to be reduced to 9-10% from 13.5% now. This is the only way India can take on international competition and become a global logistics hub — factors that will stimulate economic growth.
They point out that access to better warehousing infrastructure; easy-to-use and economical supply chain technology; faster rail, road and sea logistics networks, among others, are key enablers for the sector’s growth. They reiterate that the operating and regulatory framework of warehouses needs to be improved.
It is a long wish list, but if 2022 is to be the year India becomes a global logistics hub, these steps should be expedited.