India's logistics sector: A revolution powers a $215 billion economy

India’s logistics sector, valued at US$215 billion in 2021, is on a growth trajectory, with government data projecting a compound annual growth rate (CAGR) of 10.7 percent through 2026. This sector is now recognised not merely as a service provider, but as a critical enabler of economic growth, digital commerce, and widespread employment generation

According to a recent report by consulting firm KPMG India, this phenomenal momentum, which has seen the industry sustain a robust CAGR of 12–15% since 2017, is being fuelled by the convergence of three powerful forces: the explosive growth of e-commerce, the rising global ambitions of India's Micro, Small & Medium Enterprises (MSMEs), and an unwavering national push for digital transformation.

The sector is now the central nervous system of India's supply chain, a complex web of high-tech cargo handling, multi-modal transportation, advanced warehousing, crucial last-mile delivery, and intricate customs clearance.

The KPMG report identifies four dominant trends shaping this overhaul: consolidation, as smaller players merge to achieve scale; a widespread shift to agile business models for rapid adaptation; relentless digital innovation leveraging data and automation; and a deepening focus on sustainability to meet both environmental and efficiency mandates.

Government reforms

This private-sector is being met with decisive government action. National initiatives like the National Logistics Policy and the massive PM Gati Shakti Master Plan are creating a cohesive, modern framework for the industry. This policy support extends to tangible infrastructure projects designed to improve commerce.

To manage the surge in online retail, the government is executing a plan to establish 50 E-commerce Export Hubs (ECEHs) over the next five years. Developed under a Public-Private Partnership (PPP) model in alignment with the Foreign Trade Policy of 2023, these hubs are set to streamline exports for digital sellers.

The KPMG report said that a pilot launch is already underway with a consortium of leading firms, involving a consortium of leading firms: logistics aggregator Shiprocket and air cargo handler Cargo Service Center in Delhi; global logistics giant DHL and Lexship in Bengaluru; and goGlocal in Mumbai.

These ECEHs will operate as dedicated warehouses, featuring integrated fulfilment areas for packing and labelling alongside a customs station to ensure goods are cleared and dispatched seamlessly.

A revolution on the roads

Over the last decade, massive improvements to the national road network have fundamentally altered the logistics sector.

Today, a staggering 70% of domestic business volumes are transported by road, a stark contrast to less than a decade ago when air freight was the default for time-sensitive shipments. This strategic shift to efficient, cost-effective ground movement has been a game-changer for businesses across the country.

"Today, our domestic movement is about 70%, which is quite impressive from our industry's perspective," said Vijay Kumar, CEO of the Express Industry Council of India (EICI). "When the industry started in the mid-80s or early 90s, you had more international than domestic movement. Such a big industry is being developed. We are hoping that it will probably double by 2030."

Air cargo, however, remains a vital component, especially for high-value and express goods. The domestic air express segment handled 1.39 million tonnes in FY24, with 76% of this volume funneling through the country's six major airports.

Kumar expressed hopes for the region's infrastructure and said, "Both Bangalore and Delhi have done phenomenal jobs as far as catering to the express industry is concerned," he explained. "We are optimistic that the Navi Mumbai airport, as well as the existing Mumbai airport, will shape up to what we have seen in those cities very soon.”

From manual bottlenecks to digitalisation

The true turning point for the sector arrived in the early 2010s with the rise of a dynamic manufacturing base and the e-commerce explosion. Yet for years, this progress was hobbled by archaic customs procedures.

Clearance was a major friction point, reliant on labour-intensive manual processes for filing declarations like the Express Cargo Manifest (ECM) and Courier Bill of Entry (CBE). This mountain of paperwork created severe bottlenecks, disrupting the very speed that logistics promises.

The breakthrough came in 2017 with the launch of the Express Cargo Clearance System (ECCS). A collaboration between the EICI and Indian customs, this dedicated digital platform was nothing short of a massive leap forward.

The ECCS allows authorised couriers to upload all necessary forms digitally, completely eliminating physical submissions. It automates critical processes, including duty calculations, risk management, and consignment tracking, ensuring faster, more accurate, and transparent clearances.

A White Paper released by the EICI titled 'The Future of Express Cargo Clearance in India’ earlier this year, highlighted the system's most revolutionary feature: its ability to process document images for millions of shipments before they even land in India.

This pre-clearance capability allows for advance duty payment, seamlessly integrating speed with security. While its growth from 10 million shipments in 2019-20 to 14 million in 2021-22 was more moderate than the general cargo platform ICEGATE, the ECCS now fully operated by customs remains absolutely pivotal to the sector's efficiency.

ONDC, AI, and Automation

The government’s Open Network for Digital Commerce (ONDC) is set to further democratise e-commerce, bringing sellers and logistics providers into a single, transparent network. This allows smaller players with limited fleets to access a larger market without intermediaries.

The impact is already being felt; the KPMG report notes that B2C e-commerce shipments on the network are projected to soar from 20 million in March 2024 to an estimated 65 million by the end of 2024.

Looking ahead, the industry is betting big on Artificial Intelligence (AI) and automation. "With AI coming in, a lot of our member companies have invested quite a bit," said Kumar.

He explained that AI is crucial for predicting demand surges, not just for predictable events like festivals, but for unexpected volume spikes, which enables smarter allocation of personnel and resources.

At processing gateways, automated sorters, high-level security systems, and robotics are becoming standard. While Kumar concedes that the full deployment of robotics in Indian warehouses still lags international standards, the industry anticipates a rapid adoption curve.

Despite the powerful momentum, the white paper highlighted challenges including infrastructure gaps in last-mile connectivity, occasional customs bottlenecks for international cargo, and the complex puzzle of efficiently integrating freight movement through congested urban centers.