India Logistic Outlook 2007

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India Logistics Outlook 2007
An analysis of India and its rapidly growing logistics industry.
This brief provides an in-depth analysis of the Indian Logistics market and forecasts of market sizes, as well as the challenges and opportunities facing companies currently operating in this country or ones looking to invest.

Publication Date: March 2007

India Logistics Outlook 2007

TABLE OF CONTENTS
CHAPTER 1 EXECUTIVE SUMMARY
Executive Summary

5
5

CHAPTER 2 INDIA OVERVIEW
2.1 PESTLE Summary

8
8

2.2 Political: Declining in influence, Indian National Congress still holds the key to political stability 9 2.3 Economic: Doubts over sustainability of the current rapid economic growth continues to plague the sub-continent 11 2.4 2.5 2.6 2.7 Social: Recent economic development raises new social issues Technological: India registers an increasing technological presence globally Legal: Steps have been taken to improve the system, though a lot still remain 13 14 16

Environmental: Concerns remain buried under economic and social problems 17

CHAPTER 3 INDUSTRY OVERVIEW
Overview

18
18

CHAPTER 4 ISSUES, TRENDS AND CHALLENGES FOR LOGISTICS 21
4.1 4.2 4.3 4.4 Logistics Industry: From un-organized to organized Transportation Infrastructure Investments CAPEX by Logistics Service Providers VAT Implementation 22 23 24 25

CHAPTER 5 GROWTH DRIVERS
5.1 5.2 GDP, EXIM and Infrastructure Growth Industry Verticals

28
28 29

India Logistics Outlook 2007
FMCG Auto and Auto Components Textiles Organized Retailing Electronics Pharmaceuticals 30 31 33 35 36 38

CHAPTER 6 INDIAN LOGISTICS INDUSTRY – SEGMENTS
6.1 6.2 6.3 6.4 6.5 6.6 Air Freight CEP Market Road Freight Rail Freight Sea Freight Multi-Modal Transportation and Container Logistics

39
43 46 48 51 53 55

CHAPTER 7 THE NEXT STAGE
Summary and Conclusions

63
63

India Logistics Outlook 2007

On the other hand, since year 2000, the Indian Industrial sector has also begun to look up, and in 2006, it registered over 10% growth for the first time in decades, primarily driven by the manufacturing and capital goods segments. In the Indian manufacturing industry, textile plays a predominant role, while the chemical industry is the second largest industrial sector (12% of the GDP). However, India's influence in global trade remains low and the country represents only 1% of the world's export trade. India mainly exports engineering goods, gems & jewellery (83% of diamonds sold in the world are cut in India), textiles & fabrics, and leather goods. The major imports are oil, precious stones, chemical products and machinery/engineering equipment. India's main trade partners (export and import) are Belgium, China, Switzerland, UAE, the UK, and the US.

Table 3: Logistics industry market drivers ranked in order of impact (India) 2007-2016E Industry Driver 1-3 Years 4-6 Years 7-10 years
Geographic expansion of domestic markets through well spread-out domestic economic activity External merchandise trade increasing the demand for multi-modal logistics Foreign investments across various verticals driving the demand for improved SCM, transportation and logistics Companies focusing on core operations and increasingly outsourcing their logistics function Improved logistics and SCM services driving business for specialist LSPs Large LSPs to gain from increased inorganic activity and consolidation in the logistics industry
Source: Datamonitor

High Medium Medium Medium Medium Medium

High High High Medium Medium Medium

High High High High High Medium

With India’s GDP growing at 9% and the manufacturing sector enjoying double digit growth rates, the logistics industry is at an inflection point. Strong growth enablers exist today in the form of €250 billion worth of infrastructure investments, phased introduction of VAT, and development of organized retail and agri-processing industries. In addition, strong FDI inflows in electronics, automotive, retail, telecom, and auto component manufacturing will lead to increased market opportunities for Logistics Service Providers (LSPs). India currently spends over 13% of its GDP on logistics, which is very high compared to Western Europe and North America, where logistics cost as a percentage of GDP is in the range of 8-10%. With growing global competition, improving operational efficiency has become imperative and

India Logistics Outlook 2007
Auto and Auto Components
The Indian auto industry has the potential to emerge as one of the largest in the world. Presently, India is the world’s second largest two-wheeler market, fourth largest commercial vehicle market and eleventh largest passenger car market. With over 17% CAGR, the passenger car market is set to become the seventh largest in the world by 2016.

Figure 9:

India Automobile Production (‘000)
CVs Cars & UVs Two-Wheelers

14000 12000 10000 Production ('000) 8000 6000 4000 2000 0 2004
Source: Datamonitor

2005

2006

2007

2008

The growth in domestic demand is driven by a number of factors including the rising income levels and easy availability of low-cost finance. The Auto sector is key to the Indian economy from both the perspective of economic contribution as well as that of employment generation. The sector employs 13 million people and contributes to around 17% of the direct taxes kitty.

India Logistics Outlook 2007
Figure 17: Key Players in the Indian Logistics Industry
Express Express industry industry Courier industry Courier industry Warehousing Warehousing industry industry

Road express - Gati - Safexpress - TNT (Speedage) - TCI

Air express - Bluedart - Gati - Safexpress

Courier industry - Bludart - Firstflight - AFL - DTDC - Overnite - Professional couriers

- CWC
- DHL logistics - AFL - Om Logistics - Safex

Trucking industry Trucking industry

3PL service 3PL service providers providers

- Delhi Assam Roadways - Patel Roadways

- DHL - Schenker-BAX - SembCorp - Panalpina - Agility

Source: Datamonitor

India Logistics Outlook 2007

Figure 26:

Current and Estimated Capacity hikes in Indian ports (FY04-14E)

10 Million Metric Tons

Source: Datamonitor

Due to lower draft, the average size of the Indian ports is much smaller than prevailing sizes internationally. As most Indian sea ports consume higher time in loading and unloading operations, the ships are trapped for a much longer time, increasing the cost for shippers by 10 to 20 per cent. As the shipping industry has been granted an infrastructural status by the government, this is expected to give financial and tax Benefits for the much needed development in this sector in the coming years. The privatization of ports and the resultant improvement in port performance will also play a crucial role in the development of this sector.

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