Logistics Sector On The Path To Transformation In 2019

India’s logistics sector is going through a never seen transformation supported by regulatory reforms and structural changes. Anshuman Magazine writes on tailwinds that is accelerating the pace of growth for India’s logistics industry.

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We have seen technological, demographic and economic changes before, however, the logistics sector has never experienced such structural shifts vis-a-vis e-commerce and automation, leading to a blurring of lines with the retail sector, a transformation in supply chains as well as rising investment.

In addition to the cyclical drivers that have shaped the current logistics landscape, there have been structural drivers at play, such as changing consumer demands, the evolution of retail, the growing influence of urban areas and global investment in logistics real estate. The introduction of GST in late 2017 and the granting of ‘infrastructure status’ created a conducive business environment for the sector. In the past few years, the government has emphasized on infrastructure development, with several investment and policy proposals for the transport and logistics sector. The government has invested heavily to connect and integrate the country with a complete network of roads, railways, airports, ports and inland waterways. Such policy reforms and infrastructure development, alongside the creation of a favourable business environment, has provided substantial results.

Supply-demand dynamics, rental movement, demand drivers The year 2018 was remarkable for the logistics market in the country. The overall absorption during the year touched close to 24 million sq. ft., which was a growth of about 44 percent compared to the prevailing year. Nearly every city in India witnessed growth in space take-up on an annual basis.

Following the expected trend, 3PL, e-commerce and engineering & manufacturing drove demand during the year contributing about 35 percent, 23 percent and 15 percent to overall take-up respectively. On the rental front, several micro-markets observed appreciation owing to increased demand coupled with limited investment-grade supply.