With high hopes for its future, India’s finance minister, Nirmala Sitharaman, projects that the country is en route to becoming a US$5 trillion economy by 2028. This would make it the world’s third-largest economy.

To achieve this goal, India is set on enhancing the efficiency and competitiveness of its logistics sector.

Currently, an estimated 14 percent of India’s GDP goes towards its logistics costs, a comparatively high amount, considering China’s 10 percent and the United States’ 8 percent.

Factors that contribute to these high costs are timeliness and infrastructure. 62 percent of its logistics cost contributes to transportation, with the country’s average lead freight distance reaching 500 km. 60 percent of the country’s freight movement is still carried out via road transport, which is less efficient, as few national highways have sufficient space and lanes for efficient land transport.

Its warehouses, with limited mechanization and complex administrative processes, further contribute to logistics costs.

In response, the Government of India has been steadily fortifying its logistics infrastructure, turning to multimodal logistics to achieve a fuss-free logistics transformation.

Logistics: Smooth sailing ahead

Traditional freight movement utilizes only one mode of transport, but more than one logistics operator is involved. The product is passed from one operator to another until it reaches the customer. With this comes the hassle of paperwork for the seller, as every operator requires a contract or bill of lading.

Multimodal logistics is the seamless solution to this. Goods are moved through multiple modes of transport, but through a sole logistics operator. Under a single contract or bill of lading, sellers and buyers can be assured that their products get from origin to destination quicker and via several modes of transport — land, sea, rail, or air.

This is possible through engaging a Third-party Logistics Provider (3PL), which contracts with individual logistics operators, or, better yet, handles the entire logistics process themselves.

Sellers can tap on existing transport networks and industry expertise, making logistics processes more cost-efficient, faster, and reducing carbon emissions.

For example, DHL Global Forwarding has partnered with Schneider Electric to launch a pioneering multimodal shipping model, using Sustainable Aviation Fuel (SAF), under its GoGreen Plus partnership. Through this model, a shipping bridge between India and North America has been developed. The combination of air and sea transport has led directly to a 20 percent reduction in carbon emissions since it was implemented in March 2023, along with optimized delivery times.

Building on these initiatives, the government has integrated multimodal logistics parks (MMLPs) into the country’s infrastructure.

Park and parcel: where freight becomes fluid

MMLPs are part of the National Logistics Policy, which was unveiled in 2019 by the Government of India. Under this policy, 35 MMLPs will be established across the country.

Strategically located near key industrial and consumption centers to enhance connectivity to major transportation networks, these integrated hubs connect different modes of transportation, enabling the consolidation, mechanized warehousing, and distribution of goods. They are equipped with special storage facilities including cold storage, and handling equipment.

The hubs will also cover the management of returns and late-stage manufacturing activities like kitting and final assembly, grading, sorting, labeling, packaging, and reworking.

MMLPs aim to lower transportation costs, improve supply chain efficiency, and enhance overall trade competitiveness by streamlining logistics operations and reducing transit times.

The Silk Road of supply chains

One notable example of India's investment in multimodal logistics infrastructure is the development of the National Industrial Corridor Development and Implementation Trust. Under this initiative, dedicated freight corridors such as the Western Dedicated Freight Corridor (WDFC) and the Eastern Dedicated Freight Corridor (EDFC) are being developed to connect major manufacturing hubs with key ports and consumption centers.

Spanning 1,504km from the Jawaharlal Nehru Port Trust near Mumbai to Dadri near Delhi, the WDFC alleviates congestion and improves freight movement efficiency. It features dedicated freight tracks, updated signaling systems, and logistics hubs to facilitate faster and more reliable transportation of goods between western and northern India.

Similarly, the EDFC stretches 1,840km from Ludhiana to Dankuni near Kolkata, decongesting existing rail networks and enhancing connectivity between northern and eastern India, stimulating regional economic growth.

This is expected to lead to an estimated 20 percent reduction in freight vehicles required, and a 10 percent reduction in transportation costs.

Through these MMLPs, India is projected to lower its logistics cost to just 8 to 10 percent of its GDP by 2030, matching international standards.

Making logistics a walk in the park

While MMLPs have immense potential to lower logistics costs, one key challenge is the lack of last-mile connectivity and inadequate hinterland infrastructure. Access to rural areas remains limited, hindering the seamless movement of goods.

A lack of standardized processes, technological adoption, and regulatory frameworks also results in delays, and therefore, higher logistics costs. Addressing these issues requires concerted efforts to promote industry consolidation and enhance digitalization.

MMLPs also depend on private-public partnerships, requiring over US$6.25 billion in investments, according to a 2023 joint study by the Bombay Chamber of Commerce & Industry and Ernst & Young. However, whether this number will be attained is yet to be seen, as investors are reluctant to pledge such high sums, in light of India’s comparatively high tax rates in relation to its neighboring countries.

While MMLPs offer the potential to reduce carbon emissions and mitigate environmental impact, challenges such as congestion, pollution, and inefficient use of resources need to be addressed. Only then can suitable green logistics solutions and cleaner technologies ensure the long-term sustainability of India's logistics sector.