In a major boost for India‘s industrial competitiveness, Union Minister Nitin Gadkari announced that India’s logistics cost is expected to fall to around 9% by December 2025, down from the previous 14-16%. This dramatic reduction could transform India into a global manufacturing powerhouse and significantly enhance export competitiveness.
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India’s Logistics Cost Numbers That Matter: Before and After
An IIM Bangalore study revealed that logistics costs in India have already declined by 5-6% owing to the rapid expansion of the national highway network, with the warehouse-to-consumer segment seeing a 1.33% reduction. Here’s how India compares globally:
| Country/Region | Logistics Cost (% of GDP) | India’s Position |
|---|---|---|
| India (Current) | 10-14% | Improving rapidly |
| India (Dec 2025 Target) | 9% | On track |
| China | 8-10% | Current benchmark |
| USA | 12% | Higher than India’s target |
| European Union | 12% | Higher than India’s target |
| Global Best Practice | 8% | India nearing this mark |
What’s Driving This Historic Drop?
The reduction isn’t accidental—it’s the result of strategic infrastructure investments and policy reforms. A report prepared by IIT Chennai, IIT Kanpur and IIM Bangalore revealed that India’s construction of expressways and economic corridors has helped reduce the country’s logistics cost to 10% from 16% earlier.
Key Infrastructure Wins:
- Rapid expansion of national highway network
- Development of dedicated freight corridors
- Improved multimodal connectivity hubs
- Enhanced port infrastructure and efficiency
- PM Gati Shakti initiative connecting transport networks
The government’s focus on reducing logistics costs is part of a broader strategy to align India with global best practices and boost the “Make in India” initiative.
Breaking Down the Cost Components
India’s logistics cost is estimated at ₹24.01 lakh crore, which accounts for 7.97% of India’s GDP and 9.09% of non-services output in 2023-24, according to the first systematic assessment by DPIIT and NCAER.
Major Cost Drivers:
- Transportation: Road freight remains dominant but expensive at ₹3.78 per tonne-km
- Warehousing: Storage and inventory management costs
- Fuel expenses: A significant variable affecting overall costs
- Administrative overhead: Documentation and compliance
- Last-mile delivery: Final leg remains most expensive
Interestingly, rail logistics emerged as a cost-efficient mode with an average cost of ₹1.96 per tonne-km, while air transportation is the most expensive at ₹72 per tonne per km.
For insights on how logistics innovation is reshaping industries, explore our supply chain technology coverage.
Winners and Losers: Who Benefits Most?
The logistics cost reduction doesn’t benefit all businesses equally. Small firms spend 17% of output on logistics, while large firms only spend 7.6%, highlighting how scale creates efficiency advantages.
Biggest Beneficiaries:
- Manufacturing exporters: More competitive pricing in international markets
- E-commerce companies: Lower fulfillment and delivery costs
- FMCG sector: Improved margins on high-volume, low-margin products
- Automotive industry: Reduced input costs across supply chains
- Agricultural exports: Better cold chain economics
Gadkari emphasized that this will help India become more competitive and ensure “100 per cent it is going to give benefit to our industry, our exports will be more competitive”.
The Technology and Infrastructure Revolution
The transformation is powered by both digital innovation and physical infrastructure:
Digital Initiatives:
- Unified Logistics Interface Platform (ULIP) for seamless data sharing
- GPS-enabled fleet management systems
- Blockchain for supply chain transparency
- AI-powered route optimization
Physical Infrastructure:
- Bharatmala project connecting 550 districts
- Sagarmala for coastal shipping development
- Dedicated Freight Corridors reducing transit time
- Modern warehousing with automation
Learn about emerging logistics technologies on our infrastructure innovation page.
Environmental and Economic Impact
Lower logistics costs don’t just improve balance sheets—they reduce carbon footprints. Water transportation is not only cost-effective at ₹1.80 per tonne-km but also the most environmentally friendly mode, yet remains underutilized in India.
Sustainability Gains:
- Shift from road to rail and coastal shipping
- Reduced fuel consumption and emissions
- Optimized vehicle utilization
- Better cargo consolidation
Economic Multiplier Effects:
- Industrial profitability increases by 3-5%
- GDP growth acceleration by 0.5-1%
- Enhanced export competitiveness worth billions
- Job creation in logistics and allied sectors
Challenges That Remain
Despite impressive progress, hurdles persist:
- Infrastructure gaps: Rural connectivity still inadequate
- Modal imbalance: 65% freight still moves by road despite higher costs
- Technology adoption: SMEs struggle with digitization
- Skilled workforce shortage: Need for trained logistics professionals
- Regulatory complexity: Multiple state-level compliances
The government recognizes these challenges and continues investing in solutions through various schemes and policy reforms.
What Businesses Should Do Now
With logistics costs falling, companies can capitalize by:
- Renegotiating contracts: Lower costs mean better terms with 3PL providers
- Optimizing networks: Reassess warehouse locations and distribution strategies
- Investing in technology: Automate and digitize supply chain operations
- Exploring exports: Improved competitiveness opens new markets
- Building resilience: Diversify transport modes to mitigate risks
The Road Ahead
India’s journey from 16% to 9% logistics costs represents one of the most significant infrastructure transformations in recent history. Gadkari stated he is “sure that 100 per cent it is going to give benefit to our industry”, and the numbers support this optimism.
As December 2025 approaches, businesses should prepare for a more efficient, cost-effective logistics landscape that could redefine India’s position in global trade. The country isn’t just reducing costs—it’s building a foundation for sustainable, long-term competitiveness.
Whether you’re an exporter eyeing international markets, a manufacturer optimizing supply chains, or an investor evaluating opportunities, India’s logistics revolution offers compelling reasons for optimism.
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Frequently Asked Questions
Q: How does India’s 9% logistics cost compare globally, and what does it mean for Indian exports?
A: At 9%, India will be more competitive than the USA and EU (both at 12%) and nearly match China’s 8-10%. This translates to a 5-7% cost advantage over Western competitors, making Indian exports significantly more price-competitive globally. For manufacturing sectors like textiles, automotive parts, and electronics, this could mean capturing larger market shares in international trade. The reduction effectively adds 3-5% to industrial profit margins without changing production costs.
Q: Will lower logistics costs benefit small businesses and consumers?
A: Absolutely, though benefits vary. While large firms already operate at 7.6% logistics costs due to scale, small businesses currently spend 17% of output on logistics. As infrastructure improves and technology becomes accessible, SMEs will see proportionally larger benefits. For consumers, this means lower prices on everything from groceries to electronics, faster delivery times, and better product availability. E-commerce particularly benefits, with reduced last-mile delivery costs potentially lowering online shopping prices by 8-12%.
