2015 to script India’s growth story!
After clocking an influential growth in 2014, the Indian logistics industry is looking forward to another promising year with great hopes, plans and aspirations. In 2015, the industry hopes to see GST implemented. CARGOTALK talks to industry veterans from
The Indian logistics industry closed 2014 on a pity good note, thanks to attention given by the government to the sector. The year saw valuable initiatives been taken, especially in the air cargo industry in the form of guidelines for setting up Air Freight Stations (AFS) across the country and the draft of Civil Aviation policy released by Ministry of Civil Aviation. However, the year 2014 was a mixed bag of cheers and tears for logistics sector, though the year ended up on a decent note. Despite the minor glitch, the Indian logistics industry is looking forward to script another success story in 2015.
Prime Minister Modi has created a surge in the global interest in India and revived the Indian growth story. Thus, the industry can expect 2015 to be a year of growth and new investments that in turn will create new opportunities for the logistics sector. The ‘Make in India’ campaign will see investments would connect India to global pro- duction networks and would generate significant new business for logistics in India. This will make India an attractive location to do business as compared to others in the region. However, this projected campaign can happen only with the help of a sound and efficient infrastructure. Though India is improving on its infrastructure despite the sluggish economic growth in the last decade and emergence of large middle class market with increasing purchasing power, few sectors in India still need to catch up with rest of the world to keep pace with development taking place in rest of the world. This will help in bringing down the costs to a considerable extent.
The increasing number of ecommerce set ups has contributed significantly to growing demand for specialised logistics services which is a key support factor for the business. On the other hand, industry is also looking forward to encourage intellectual abilities in cargo and logistics sector. Infrastructure for education, training and research is needed to ensure availability of talented and skilled work force capable of functioning with efficiency and bring innovation in the sector.
CARGOTALK talks to industry veterans to know their expectations and wish list for 2015.
Air cargo is expected to grow significantly as the international air cargo will be primarily driven by US and European economies. And, these economies are expected to do fairly well with new markets like China and Africa which has shown positive signs of growth. Indian economy is also expected to be on a growth trajectory with new Government initiatives for conducive policy environment and initiatives like ‘Make in India’ shall boost the economic growth of the country. This however has to be supported by adequate road infrastructure to feed into the gateway airports to bring out the real potential.
The new sector which is expected to open up is International E-commerce. However, nationally E-commerce has already shown extensive growth which is expected to follow the same trend in FY16. Domestic air cargo sector is also expected to see more freighter movements. The IATA initiative for air cargo supply chain to go paperless is also expected to take new heights in India with Delhi and Bangalore airports already being IATA E-freight compliant and more airports are expected to follow the e-freight route.
Transhipment cargo will be the key driver for hub airports wherein India gets benefited with its unique position in Asia pacific region and is expected to grow significantly.
Perishable commodity is another big opportunity as India leads in production on most of this commodity but takes a back foot in exports due to unavailability of required infrastructure to maintain the end to end cold chain from production to airports.
2014 was not the best year for the industry as we did not see growth in imports & exports. However, there are some signs of revival, hopefully growth to follow in the year 2015.
However, a successful ‘Make in India’ initiative will give much needed impetus to the manufacturing sector and this lead to growth in both exports and imports by the manufacturing sector. The factor that will facilitate the effective functioning of logistics industry is Infrastructure only, which includes physical infrastructure, infrastructure for education, research and training and regulatory infrastructure.
The greatest challenges of the logistics sector particularly international logistics sector are thinning of margins due to commoditisation and undifferentiated services coupled with over delayed payments by the customers.
The increasing costs and signs of global slow recovery resulting lower yields have put a pressure on the bottom line of the industry. Even though there are signs of growth. We expect the current trend of growth in air cargo to continue uninterrupted. Clean regulatory environment will bring global standards of accountability for all stakeholders including government agencies for efficiency.
Air cargo needs a makeover and that can happen only if all the airport stakeholders along with regulators strengthen their collaboration to become more effective and faster. The air freight industry has come a long way from the past. The growth in the industry was driven by technological advancement, infrastructure development, effective commercial models for airports, growth in 3pl & 4pl logistics, cold chain and warehousing segments and drive for eCommerce and e-Freight. Engineering goods, Electronics, Pharmaceuticals and e-Commerce will be the major business drivers.
The sector is seeing growth after some challenging years and the future could be promising for the industry. Looking ahead to 2015, more access to Tier II and Tier III cities can be seen with more fleet orders and strategic partnerships. I would like to see some sort of flexibility in aviation tax structures. There could be more international airlines and LCCs operating to/from the Indian skies through strategic bilateral agreements and FDIs in Indian carriers thus enhancing the capacity of passenger seats and cargo belly space. Industry is optimistic that the new government will upgrade the air cargo sector. We look forward to see the government bring out the right policies to support the air cargo industry. The government needs to put in more efforts to identify the challenges, examine the procedures to improve efficiency of air cargo logistics.
2014 was not a spectacular year. The big infrastructure push in India will spur production and exports. However a steady and moderate oil prices will improve the bottom lines of carriers. Process simplification needs to be addressed immediately to reduce the transaction cost and human interface between the regulator and common man needs to be replaced with technology so that we would be able to achieve a time definite processing windows.
2014 saw a tremendous surge in online retail. The big game changer will undoubtedly be the implementation of GST, which will make small fragmented warehouses inefficient. Lack of trained manpower and transportation, along with infrastructure will continue to pose a challenge in 2015. Infrastructure development, which includes roads, railways, and improved quality of warehouses, will go a long way in supporting the industry. Also, acceleration of projects like the Delhi – Mumbai Industrial Corridor (DMIC) will create efficiency in the logistics sector.
New government has bought support to all the missing components; either we talk about entailers or modern pack houses. The government has allocated Rs 5000 crore fund for cold chain segment and another Rs 2000 crore for food processing. Subsidy support of 35-50 per cent has been given for infrastructure set up.
If something is missing then it is industry leadership only. Our industry does not have a leadership. They wait for government policy to drape them. Industry has to take leadership, see the advantage of being in the food distribution business.
Government policy is already there to support; we have laid the ground for you now run faster.
Vikas Anand MD DHL Supply Chain India
Pawanexh Kohli Chief Advisor NCCD
Cyrus Katgara Partner Jeena & Company
Shantanu Bhadkamkar Immediate Past Chairman, FFFAI
Manoj Singh Vice President MIAL
Pradeep Panicker President ACFI
Vice President, MIAL
Chief Advisor, NCCD
Partner, Jeena & Company
Immediate Past Chairman, FFFAI
Managing Partner, S. Natesa Iyer & Co.
Managing Director, DHL Supply Chain India