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Indian Logistics Industry- Launch of mShipper: Ken Research

Posted on 26 July 2016 by KenResearch

Logistics refers to the commercial activity of transporting goods or services to customers. Logistics has become a pivotal part of the business economic system as it accelerates economic growth. The logistics industry in India was estimated to be worth USD 130 billion in 2013 and has been growing rapidly. The logistics companies in India are rapidly evolving and providing a myriad of services such as transportation, warehousing, pool distribution, management consulting, logistics optimization and many more. The government has also taken a number of initiatives to ensure a favorable business climate in this industry.

The logistics sector in India is also experiencing a number of innovations in the recent times. One such case is the launch of “mShipper” by a group of youth which focuses on making delivery a dispute free experience for small businesses, e-tailers and retailers in Delhi-NCR. Capitalizing on the idea of a shared economy, the platform takes on board willing individuals ‑ the shippers ‑ to pick and deliver packages on the go, allowing them to either save on their commuting cost or earn some extra income. Apart from making delivery, they are also concerned with making delivery a more personalized way and at the same time faster than others.

The Indian Logistics industry is projected to grow at a CAGR of 15-20% between 2015 and 2020. However, the implementation of the long awaited one-nation-one-tax, GST in the country can change the scenario of this industry and the Indian economy as a whole. The GST rollout can help boost the GDP by 100-200 bps as this will help faster and cheaper movement of goods across the country with a uniform taxation structure. The faster movement of goods will result into the augmentation of the logistics industry. Not only this, GST can also bring down the logistic costs by up to 20 per cent from the present levels by reducing the long and winding queues at border check-points and other entry points within and between the states.

There are various other means by which the implementation of GST can provide a boost to the Indian Logistics Industry. Due to various kinds of taxes such as entry tax, local body tax, and many other hurdles, the trucks are idle for 30-40 % percent of the day leading to huge fuel and manpower losses. With the implementation of GST which will be levied on goods transportation, logistics cost is expected to come down by 1.5-2 per cent of sales due to warehouse optimization and lower inventory cost.

GST has the potential to accelerate growth in the logistics industry, however its complete impact at the moment is ambiguous. A large number of debatable issues, such as the clear definition of supply, supply chain management through warehouse engineering, credit allowance during the transition phase, classification of goods and services under GST, etc. still remains to be answered. With GST’s imminent implementation, the logistics industry should start exploring different supply chain models with their clients. However, despite of all these apprehensions, GST is the much required change in the logistics industry, as the positive impact of GST far outweighs the disadvantages for this industry.