Indian logistics needs urgent IT investment

Although Indian airports spend an estimated 10-15 per cent of their total revenue on IT - nearly INR 400 million (US$8 million) per annum - unless investment is stepped up, the country risks sacrificing 1-2 per cent growth.

In a report entitled, ‘Technology Survey for the Indian Logistics Industry – 2008’ conducted by Kale Consultants Ltd in partnership with Feedback Business Consulting Services Pvt. Ltd, reveals that new investments of INR 285.25 billion (US$5.7 billion) are expected at airports in the next four years to boost their IT requirements, according to Kale’s head of logistics,Sumeet Nadkar.

“This is one of the segments where IT utilisation is maximum compared to other segments in the logistics space,”he notes.

A fragmented industry
The Indian logistics industry, comprising many disorganised enterprises, transporters, express cargo movers, courier companies, freight forwarders, container companies and shipping agents, is highly fragmented. Firms are facing competitive pressures to focus on core operations and to lower costs which is leading to a growing demand for outsourced logistics services.

The Indian logistics industry’s size is estimated at INR2.55 trillion for FY 2008, and its size is expected to grow to INR4.1 trillion by 2013. Although road freight constitutes 60 per cent of the overall industry, the sector is entirely vested in the hands of small private players. The top-end of the market is controlled by a handful of multinationals and large domestic players.

Nadkar says India spends around 13 per cent of its GDP on logistics, higher than in the US (10 per cent), Europe (11 per cent) and Japan (10 per cent), and this translates to around INR1.5 trillion in extra operating costs for the economy and therefore a loss in capitalformation.