Indian logistics costs at 7.97% of GDP, new study reveals

India's total logistics cost for the 2023-24 fiscal year is 7.97% of its Gross Domestic Product (GDP), according to a new report from the National Council of Applied Economic Research (NCAER) titled ‘Assessment of Logistics Cost in India’.

The report said, “This total logistics cost accounts for 7.97 per cent of India’s GDP and 9.09 per cent of non-services output (agriculture, mining, and manufacturing) in 2023-24.”

The study also found that the growth rate of these costs is slowing, a trend attributed to various government initiatives like the PM Gati Shakti National Master Plan, dedicated freight corridors, and the Sagarmala project.

A detailed breakdown of costs across different transport modes reveals key insights.

Rail is the most cost-effective, with an average of ₹1.96 per tonne-km (PTPK).

Waterways are also a cost-efficient option at ₹2.30 PTPK, although coastal shipping at ₹1.80 PTPK is cheaper than inland water transport which is ₹3.30 PTPK.

Road transport is more expensive at ₹3.78 PTPK, while air transport is the most costly at ₹72 PTPK, typically reserved for high-value, time-sensitive goods.

The report also highlights warehousing costs, with an average of ₹30 per square foot per month. Specialised facilities are significantly more expensive, with temperature-controlled warehouses costing ₹58.5 PTPK and those for hazardous cargo costing ₹56 PTPK.

Manpower is the largest cost component in warehousing, accounting for 30% of total expenses.

Despite these findings, the report also notes challenges across the logistics sector.

Rail transport faces operational bottlenecks and a lack of first/last-mile connectivity.

Road transport is affected by uncontrolled pricing, while air transport has inadequate infrastructure at regional airports.

Water transport, particularly inland waterways, suffers from insufficient navigation infrastructure and seasonal water level variations.

Union Minister Piyush Goyal said that the new study provides a clearer picture than previous estimates, which often varied widely and caused confusion for policymakers and international stakeholders.

"Until now, logistics costs in India were often misrepresented, with commonly cited figures of 13–14% of GDP derived from external studies or partial datasets," he said.

This study adopts a hybrid approach, drawing on both primary and secondary data, to estimate the value of India’s logistics cost, its components, and sub-components.

The aggregate logistics cost is estimated at ₹24.01 lakh crore (₹24.01 trillion) at current prices in the year (2023 -24), derived from secondary data sources including the Supply and Use Tables (SUT), National Accounts Statistics (NAS), and Reserve Bank of India (RBI) Balance of Payments (BoP) statements.

Secondary data sources include the latest available SUT, NAS published by MoSPI, and the Balance of Payments (BoP) statements published by the  RBI.

Primary data has been collected through extensive in-person surveys with both logistics service users (industries) and service providers (transporters, freight forwarders, and warehouse operators, among others).