In the forthcoming Ti Contract Logistics Market Forecast, we observed that India is set to overtake Japan to be the second largest contract logistics market by volume in the Asia Pacific region by 2028. Ti forecasts that with 14.0%, 13.0% and 13.2% volume growth in 2024, 2025 and 2028, India will achieve a contract logistics market volume size of €22,838.5m by 2028, compared to Japan’s €20,045.1m in the same year. Japan will grow 1.1% and 0.6% in 2025 and 2028, similar to Europe’s 1.8% and 1.7% in 2025 and 2028 though slower than North America’s 1.7% and 3.2%.
Almost all economic analysts suggest the Indian economy is set to grow around 7.0% y-o-y in 2024. According to Deloitte’s analysis of the Indian economy in Q1 of 2024-25, “The expenditure approach points to strong private consumption growth, which grew 7.4% in the first quarter from a year earlier.” Given the private consumption will involve a supply chain and its warehouses at various points, this is just one of the reasons why contract logistics as a market is set for strong growth now and into the future.
At the same time, Deloitte stated that manufacturing activities grew 7% y-o-y in the quarter. This is again resultant of one of the newly re-elected PM’s core policies – “Make In India” whose website states was originally developed in 2014 and is to, “Transform India into a global design and manufacturing hub.” Manufacturers use 3PLs as redundancy in their supply chains, so manufacturing contributes to contract logistics volumes as does private consumption.
Services as exports
The service sector as opposed to goods may well support the country’s GDP growth, fostering domestic demand for retail goods, and this may well contribute to its powerful growth in the contract logistics market. In financial year 2021-2022, the service economy accounted for 52% of India’s GDP, and service exports are growing at an explosive rate. Goldman Sachs valued the India services export industry at $338bn in 2023, growing at “almost double the rate of the rest of the world – and [has] come to form nearly a tenth of the national GDP”. By 2023 the analysts say, “India services exports will hit 11% of GDP by 2030.”
Where contract logistics is a service in its own right, the wider service industry itself is composed of salaried professional workers who in many cases have more disposable income than those in the unsalaried agrarian economy. This is why the services segment of the economy will feed back to Deloitte’s ‘private consumption growth’ and thus to the supply chain and domestic contract logistics, setting the scene for long term growth in contract logistics in India.
Author: Richard Shrubb
Source: Ti Insights
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