An Insight Into The Logistics In India Economics Essay

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In this report, we will highlight the topic on market size, infrastructure, human resource, cultural aspects, and logistics systems.

Market Size

India is the second most populated country over the world. It is believe that India has enormous potential to become a major global force to reckon with the strength of having huge market size. Owing to the liberal government policies, the India Market Size has increased in recent year.

It can be proved from the situation of new entry of players to the Indian market. It is very difficult to gauge the full extent of India Market Size due to the extremely heterogeneous nature of the various elements within the country. However, we can classify the Indian Market Size into 4 categories, which are:

Labour market

Money Market

Commodity Market

Capital Market

India is 11th largest economy in the world by nominal GDP and the 4th largest by purchasing power parity (PPP). India's per capital income (nominal) is $1030, ranked 139th in the world.

Previously a closed economy, India's trade has grown fast. Based on WTO, India accounts for 1.5% of World trade in 2007. In 2006, India's trade has reached a moderate share 24% of GDP, up from 6% in 1985.

GNP per capital, also refereed to as Gross National Income, it shows the total amount of money that the consuner within the country spent on all the goods and services in a year devided by that country's population.

In India, GNP per capita grew by about 3.2 percent a year.

The figure shows the Gross National Income (per capita) by countries ranking. GNP in India is $441.56 person, and ranked 128th over 170 countries.


The infrastructure is not advanced and still not on par with the western world. The road, rail, air and seaports are strained and have been in poor condition. The India government has embarked on a US$500 billion nationwide investment plan; a large portion of the investment is to build a new and vastly improved transport system.

However, in aspect of logistics, it is still challenging to deliver the goods on time in India, due to the lack of sustained investment in planned infrastructure like warehouse, transport centres, ICD etc.

The Cold Chain infrastructure is very sporadic, and not common in India. There is no "integrated Cold Chain" concept existed in India. The warehousing in private sector is in poor quality, fragmented and does not meet infrastructure standards. There are no quality standards or benchmarks are followed in infrastructure creation.

The major investments on logistics infrastructure in India are come from Government agencies, such as CWC,, SWC, CONCOR etc.

The key demand drivers for logistics infrastructure in India include:

Needs for more Inland Container Depot(ICDs) in the next 5 to 10 years.

ICD is a common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export. Transhipment of cargo can also take place from such stations. (Quoted from" guidelines for setting up Inland Container Depot and Container Freight Station in India.")

According to the report of Infrastructure Development Corporation Limited, India requires at least 40 to 50 new rail/road ICDs/ consolidated freight system (CFS) across the country to handle the projected traffic in next 5 to 10 years.

The robust growth of international trade, capacity constraints in movement and evacuation of cargo leads to the needs for surging demand for green field ICDs and development of existing facilities.

Critical needs for Free Trade Warehousing Zones(FTWZ)

India needs FTWZ to carry out logistics function more efficiently. With the trade related infrastructure, FTWZ can provide storage and handling equipments, shared storage space etc, which would take the advantages of economic of scale.

Urgent needs for air cargo processing space.

The urgent needs for air cargo centres are due to the growth in air cargo as well as up gradation of infrastructure at various airports.

Urgent needs to create modern agro warehouses.

This is due to the reason of major corporate and international players are interested in setting up agri based retail outlets across the country.

Human resources:

India is known as "demographic dividend" for younger population if compared to other developed countries. India is a huge country consisting of educated, English speaking, tech-savvy personnel.

Every year, there are approximately 19 million students are enrolled in high schools and 10 million students in pre-graduate degree courses across India. In addition, 2.1 million graduates and 0.3 million post-graduates pass out of India's non-engineering colleges.

These figures provide the information of human resources availability in India.

The government is trying to train this younger workforce to meet the global talent needs. According to Kapil Sibal, India's minister for human resource development, he is planning to get at least 30% of India's 240 million schoolchildren into higher education over the next decade, increased from 12.4% currently.

However, it is challenging due to the insufficiency of education infrastructure and financial resources in India.

Cultural Aspect

India consists of 14 major and 300 minor languages. Each province has its own language, tradition and culture.

In India, the business always started with establishing a rapport with the potential business partner. before going into the actual business aspect. English is widely spoken among business community.

The social status in India is determined by age, qualification and profession.

Indian likes to share the topics of family, politics, cricket, and Bollywood. During the conversation, having an eye contact with elderly or seniors for longer duration is sometimes considered disrespectful.

In India, the word "No" has harsh implications, while evasive refusals are acceptable.

In aspect of punctuality, it is normal for being late by 15 minutes in India.

Their important festival is Deepavali, it is popularly known as the "festival of lights". It is occurring between mid-October and Mid-November. Indian will celebrate the festival with family members, and performing traditional activities in their homes.

Logistics System:

According to Cushman & Wakefield Inc (a real estate service company), the annual revenues from India's logistics industry will hit €300bn by 2015, it is 3 times the earnings for 2008.

With the growth in retail and manufacturing, a build programme is needed urgently, with Mumbai, Kolkata and Chennai expected to be home to new logistics parks. However, it is needed to overcome the problem of inefficiencies in the India's logistics system. For example, the cargo taking 19 days to clear ports compared with 3 days in Singapore.

The transport system is playing an essential part in logistics system. The extensive transport system network had expanded rapidly since the country's independence from the British Regime in 1947, however, the growth has not kept pace with the country's booming domestic and international trade. In logistics industry, India suffers from fragmentation, complex tax laws and insufficient technological aids.

There is around 65% of goods are transported by road. The road transportation vehicle ownership is under the individual truck owners. Majority of the truck owners have fleets of less than 5 vehicles.

Inventory carrying costs contributes about 24% of logistics costs. While the order processing and administrative costs accounts for an additional 10%.

Most of the stock filing and warehouse management are controlled manually, and leads to higher administrative costs. The supply chain for fresh foods in India, is still rudimentary, this is because of insufficient investment in refrigeration, and there are few large scale food processors in India.


In conclusion, India is a country where cities are unplanned, electricity is spotty, and paved roads are clogged or nonexistent. The logistics system in India is fragmented, laws and governance are arbitrary, counterfeit products compete with branded products, and hundreds of millions of people still live in poverty. The lack of financial resources and insufficient infrastructure are the two main obstacles in developing the country's logistics aspect.