India’s logistics sector, a critical backbone of its economy, continues to grapple with elevated expenses that hinder competitiveness, with current estimates pegging costs at around 7.8-8.9% of gross domestic product (GDP) based on recent assessments. This figure, derived from a detailed study by the National Council of Applied Economic Research (NCAER) for the fiscal year 2021-22, marks a notable improvement from earlier projections of 14-18%, yet it still lags behind global standards where efficient systems keep expenditures in the single digits. As the nation pushes for reforms under initiatives like the National Logistics Policy (NLP), understanding these costs and their international context is essential for stakeholders aiming to boost trade and economic growth.
India’s Logistics Cost: Breaking Down the Numbers
According to the NCAER report, commissioned by the Department for Promotion of Industry and Internal Trade (DPIIT), India’s logistics expenses—encompassing transportation, warehousing, and inventory management—stand between 7.8% and 8.9% of GDP. This is a significant drop from widely cited older figures of 13-14%, reflecting advancements in infrastructure like dedicated freight corridors and digital platforms. Road transport dominates at 60% of freight, contributing to higher costs due to inefficiencies such as urban congestion and poor last-mile connectivity.
Union Road Transport Minister Nitin Gadkari, in a June 2025 address, stated that costs have fallen to about 10% of GDP, with ambitions to trim it further to 9% by year-end through integrated planning. The NLP, launched in 2022, targets a reduction to 8% by 2030, focusing on multi-modal hubs and technology integration. However, fragmentation in the industry—where small players with fleets under five trucks handle 90% of operations—continues to inflate expenses, as per a CII-Arthur D Little study.
Global Comparison: Where India Stands
Internationally, India’s logistics burden exceeds benchmarks in advanced economies. The US and Europe maintain costs at 8-10% of GDP, benefiting from seamless intermodal networks and automation. China, a manufacturing powerhouse, keeps it at 9%, leveraging high-speed rail and efficient ports. The global average hovers around 8%, per World Bank data, giving these nations a competitive edge in trade.
India’s ranking on the World Bank’s Logistics Performance Index (LPI) has climbed to 38th in 2023 from 44th in 2018, driven by faster customs clearances and better tracking. Yet, it trails neighbors like Vietnam (43rd) and lags far behind leaders like Singapore (1st) at 5-6% of GDP. High costs erode export margins—India loses an estimated $22 billion annually to road delays alone, per industry reports—making goods 10-15% pricier than Chinese counterparts.
Expert Opinions: Calls for Urgent Reforms
Analysts emphasize that slashing logistics expenses is key to unlocking India’s growth potential. In a LinkedIn post, supply chain expert Nikhil Agarwal noted, “Bringing costs to single digits could add 1-2% to GDP by enhancing trade efficiency.” He praised the PM Gati Shakti plan for mapping infrastructure but urged faster execution to integrate roads, rails, and ports.
On YouTube, economic channels like those with over a million subscribers analyze the sector’s woes. One video expert stated, “India’s 10% cost stems from over-reliance on roads—shifting 30% freight to rail could save billions.” They reference successful models like Germany’s, where digital tolling and green corridors keep costs low.
Policy thinkers from NITI Aayog argue for digitization: “Platforms like ULIP and e-logs are game-changers, but adoption by small operators is crucial.” A Drishti IAS report warns that without reforms, high costs will stifle MSMEs, which contribute 30% to GDP but face 14-17% logistics burdens.
Critics, in an Indian Express op-ed, highlight data gaps: “Accurate metrics are vital—older 14% estimates were inflated; the new 8% baseline allows targeted interventions.”
Key Points: Challenges and Pathways Forward
- Current Estimate: 7.8-8.9% of GDP (NCAER 2021-22), down from 14-18%; aim for 9% by 2025-end.
- Global Benchmarks: US/Europe: 8-10%; China: 9%; Global avg: 8%.
- Major Factors: Road dominance (60% freight), congestion, and fragmentation; inefficiencies cost $22 billion yearly.
- Reforms Underway: NLP targets 8% by 2030; 35 multi-modal parks and digital tools like ULIP to cut delays.
Analyzing India’s Logistics Dilemma: Opportunities Amid Hurdles
India’s high logistics costs—still double some global peers—stem from infrastructural bottlenecks and a fragmented market, eroding competitiveness in exports worth $450 billion annually. The sector, valued at $200 billion, loses efficiency to poor truck utilization (300 km/day vs. global 500-800 km) and empty runs (40% of trips), per a MatchLog study.
Positively, reforms like Bharatmala (highway expansion) and Sagarmala (port upgrades) are yielding results, with port turnaround times dropping 45%. Experts predict that achieving 9% could boost GDP by 1.5-2%, per World Bank models, by enhancing manufacturing and trade.
Challenges persist: Urban congestion and labor shortages inflate costs, while climate vulnerabilities add risks. A Maritime Gateway analysis suggests tech like AI route optimization could save 20-30% in urban logistics.
Globally, India’s push mirrors China’s success, but scaling requires PPP investments and skill development. As the government eyes single-digit costs, precise data and execution will determine if India can emerge as a logistics powerhouse, driving its $5 trillion economy vision.
