In an exclusive interview with Industry Outlook magazine, Varun Gada, Director of LP Logiscience, enumerates the factors driving the growth of India’s logistics sector and the challenges they must overcome to maintain a positive outlook. He is a seasoned supply chain management professional with over 11 years of valuable experience and expertise in contract logistics. He is a computer science graduate who began his career in software development, later becoming the CEO of a start-up before eventually joining the family-owned logistics business.
In recent years, India has witnessed a remarkable revival in its warehousing sector, with Grade A facilities emerging as the cornerstone of this resurgence. Fuelled by the exponential growth of e-commerce, retail, and manufacturing sectors, there has been an escalating demand for quality warehousing space, particularly in Grade A facilities, marked by modern amenities and advanced logistics systems.
According to IMARC Group reports, the Indian warehouse market size reached INR 1,378.7 billion in 2023 and is expected to grow significantly, reaching INR 3,107.5 billion by 2032. This projection reflects a CAGR of 9.2% during the period from 2024 to 2032. Additionally, as per the India Warehousing Market Report 2023 by Knight-Frank, in the first half of FY 2024 (April to September 2023), approximately 2.1 million square meters (23 million square feet) of warehousing space was transacted, with 53% of these transactions occurring in Grade A warehousing spaces.
In tandem with the dynamic growth of Grade A warehousing in India, positive government policies have played a pivotal role in shaping the trajectory of the sector. The Indian government's proactive stance towards bolstering the logistics and industrial landscape has been instrumental in attracting investments, fostering innovation, and streamlining regulatory frameworks. Initiatives such as the National Logistics Policy, Make in India, and the implementation of Goods and Services Tax (GST) have laid a robust foundation for the warehousing sector's expansion. Moreover, India's ambitious vision to position itself as a global hub for logistics underscores the significance of enhancing infrastructure, fostering ease of doing business, and promoting sustainable practices across the supply chain. By aligning policy objectives with industry imperatives, India is poised to emerge as a beacon of excellence in the global logistics arena, driving economic growth and fostering inclusive development. With this dynamic backdrop, let’s understand the key opportunities and challenges in the sector:
Global and Domestic Institutional Investments: India's burgeoning logistics and industrial sector has attracted significant investments from both global and domestic investors. This influx of capital is not confined to Tier 1 cities but is permeating into Tier 2 and 3 cities, which are emerging as key consumption and e-commerce hubs.
Advancements in Technology and Automation: Large Grade A warehousing facilities are embracing technological innovations and automation to optimize operations and enhance efficiency. Urban logistics is gaining prominence, driven by the demand for on-demand solutions and rapid deliveries.
Omni-Channel Retailing: The convergence of traditional warehouses and retail stores into fulfillment centers is revolutionizing the retail landscape through omni-channel retailing. This strategic integration enables effective inventory management, streamlined operations, and cost optimization.
Regulatory Complexities: The regulatory framework governing warehousing in India is fragmented and marked by inconsistent enforcement practices across different states and regions. Harmonizing regulations and ensuring uniformity remains a pressing challenge for the industry.
Infrastructure Gaps: Despite the sector's growth trajectory, inadequate transportation and logistics infrastructure pose significant challenges in ensuring seamless connectivity to major transportation hubs. Bridging these infrastructure gaps is imperative for optimizing supply chains and enhancing efficiency.
Land Utilization Constraints: In cities characterized by limited land supply and soaring land costs, the adoption of multi-story warehousing presents a viable solution. However, transitioning to vertical storage requires innovative design and meticulous planning to maximize land utilization effectively.
In conclusion, while the Grade A warehousing sector in India offers promising opportunities for investors and stakeholders, navigating the landscape requires adeptly addressing regulatory complexities, bridging infrastructure gaps, and catering to specialized needs. By leveraging technological innovations, fostering strategic partnerships, and embracing sustainable practices, India's warehousing sector can realize its full potential as a cornerstone of the nation's economic growth and industrial development.
