The logistics sector plays a crucial role in the Indian economy, representing 14.4% of the GDP. Intending to become a USD 5 trillion economy by 2025, India is working to improve its ranking on the Logistics Performance Index and reduce logistics costs from 14% to 8% of GDP within the next five years to become more competitive globally.
The Indian government is already implementing various initiatives such as PM Gati Shakti, National Logistics Policy 2022, National Logistics Law, Logistics Master Plan, National Multimodal Facilities and Warehousing Policy, and National Logistics Workforce Strategy to promote the logistics sector.
The upcoming budget for 2023-24 should prioritize improving India’s ranking on the Logistics Performance Index and creating a unified policy with integrated institutional mechanisms to make India a multimodal logistics hub. Additionally, the budget should focus on investing in technology and digitalization of customs processes for efficient cargo clearance. It is also crucial for the government to prioritize completing current projects on schedule to pave the way for future projects.
The Indian logistics industry is eagerly awaiting the Union Budget 2023-24, as it expects the government will announce a host of measures to boost the sector and make it more competitive globally.
Infrastructure and Logistics:
One of the key expectations of the Indian logistics industry from the Union Budget 2023-24 is the announcement of measures to improve infrastructure in the sector. The logistics industry is heavily dependent on road, rail, port and air infrastructure, and any improvements in these areas will help reduce costs and improve efficiency. This could include investments in building new highways, upgrading existing roads, and expanding rail and port infrastructure.
Land transport: The Indian Union Budget may include funding for construction and maintenance of highways, roads, and bridges and development of public transportation systems such as buses and trains. Additionally, expect the budget to include measures to promote the use of electric and other alternative fuel vehicles and initiatives to improve road safety and reduce traffic congestion. Overall, the industry also expects the budget to focus on expanding and modernizing the country’s land transport infrastructure to support economic growth and improve the quality of life for citizens.
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Air cargo: Some of the key areas of focus for the air cargo industry in India may include:
- Increased investment in infrastructure, including the development of new airports and the expansion of existing ones, to help boost the overall capacity of the logistics industry.
- Measures to improve the ease of doing business and reduce red tape, such as simplifying customs procedures and streamlining regulations, to make it easier for businesses to transport goods by air.
- Incentives to promote the growth of the domestic air cargo industry, such as tax breaks and subsidies for companies that expand their air cargo operations.
- Increased funding for research and development in the air cargo sector to help Indian companies stay competitive on the global stage.
- Measures to promote the usage of advanced technologies such as automation, AI, and IoT in the air cargo industry, to enhance efficiency and reduce costs.
- Special focus on Tier-2 and Tier-3 cities to promote air cargo and warehousing facilities to support the growth of e-commerce, agriculture and other sectors.
- Incentives to increase the usage of electric and hybrid aircraft to reduce emissions and meet sustainable development goals.
- Overall, the air cargo industry in India is likely to be looking for a budget that supports its growth and development, considering the unique challenges and opportunities facing the sector.
Shipping industry: The industry may expect investment in port infrastructure, such as modernization and expansion of existing ports and development of new ports, to improve the efficiency and competitiveness of Indian ports. The industry may also expect measures to encourage the domestic shipping industry, such as providing subsidies or tax benefits to local shipping companies.
Digitalization and Innovation: The Indian logistics industry expects to see a focus on digitalization in the Union Budget 2023-24. Policies to promote the use of technologies such as automation, artificial intelligence, and the Internet of Things (IoT) in the logistics industry can help improve efficiency and reduce costs.
The government could also consider incentives for companies to invest in these technologies. This could include measures such as increased funding for technology infrastructure, tax incentives for companies implementing digital solutions, and policies aimed at promoting the adoption of digital technologies in logistics operations. Additionally, the industry may look for the government to invest in digital initiatives that will improve overall efficiency and productivity of logistics operations, such as improving transportation infrastructure and streamlining customs and clearance processes.
Streamlining customs and trade facilitation: Simplifying customs procedures and reducing clearance times at ports and airports can come into the focus of this budget. Initiatives could be the digitization of customs clearance processes, simplified documentation requirements, and the introduction of more transparency and predictability in the clearance process. Digitization of ports and airports helps to improve the efficiency of customs clearance. The budget may also include measures for the ease of business, such as reducing bureaucratic red tape and strengthening the regulatory framework for logistics. Also, promote free and fair trade to reduce the time and costs associated with importing and exporting goods.
Easing the Burden of Taxation: The logistics industry also expects the Union Budget to include measures aimed at simplifying tax practices, including the tax filing process, reducing compliance burdens and introducing more transparency in the tax system. The industry may also look for the government to provide tax relief to logistics companies, such as reducing the corporate tax rate, reducing red tape, and providing more support for small and medium-sized enterprises. Introducing tax credits for businesses that invest in logistics infrastructure and technology is a good start. The logistics industry also expects measures to reduce the overall tax burden, such as reduction in GST, customs duties or subsidies for freight and logistics companies.
Building a Sustainable and Efficient Logistics Ecosystem: The logistics industry in India is likely to have expectations for increased focus on sustainability in the Union Budget 2023-24. This could include measures such as tax incentives for companies implementing sustainable practices, funding for research and development of sustainable technologies, and policies. The industry expects to contribute to improving the overall environmental impact of logistics operations, such as promoting the use of electric vehicles and alternative fuel sources and improving the energy efficiency of warehouses and logistics facilities. Additionally, the budget may also include measures to increase the use of digital technologies in logistics, which can help reduce the carbon footprint of logistics operations.
Lastly, the Indian logistics industry expects the government to improve the skill development and training of the workforce in the sector. This could include setting up training centres, providing financial assistance for skill development programs, and encouraging companies to invest in employee training. The government’s commitment to improving infrastructure, promoting the use of technology, simplifying regulations, and investing in skill development will be crucial in achieving this goal.