Boost for logistics

INTERVIEW/ ICICI BANK PERSPECTIVE

'There will be an increasing degree of consolidation'

The logistics sector in India is at an inflection point. The Central sales tax is being phased out, huge investments are taking place in infrastructure, technology, manufacturing and outsourcing, and all these will give a big boost to logistics.

There will be an increasing degree of consolidation of unorganised players. The organized part of the industry will grow at 20 to 25 per cent a year, though the unorganised segment will grow at just 8 to 10 per cent. The overall logistics market is about Rs 3.3 trillion today, and this is expected to grow to an estimated Rs 4.3 trillion by 2011.

The organized segment is expected to grow from an estimated Rs 213 billion today to an estimated Rs 650 billion by 2011. Organised players will become more bankable, and so this will further boost their growth, besides being good for the banking and financial services industry.

"Organised players will become more bankable"
Sanjeev Mantri
General Manager, ICICI Bank

The key link in logistics is transportation. In the developed world logistics costs amount to 7 to 8 per cent of GDP, whereas in India it is 19 to 20 per cent because of inefficiencies and wastages. In India we do it not as an integrated activity but as separate bits of activity.

Now the logistics industry in India is becoming corporatised because of the greater need for more efficiencies and cutting costs. Until five years back, logistics in India meant only transport. But lots of inefficiencies got built into the system due to pilferages, stocking up of inventory on the roads or in the warehouses.

Efficient logistics is critical, because it leads to better inventory management, with reduced inventory carrying costs and fewer production outages. All these are critical components in cost control and manufacturing efficiencies.

"Efficient logistics is critical, because it leads to better inventory management"
Ravi Narayanan
General Manager, ICICI Bank