India is a rising star in the global economy, with a growth trajectory that has been nothing short of impressive in recent years. To continue this upward momentum, the country has its sights set on becoming a global supply chain hub.
This ambitious goal is driven by several factors, including the need to enhance India's competitiveness on the world stage and strengthen its domestic manufacturing capabilities. But the question remains, can India establish itself as a dominant player in the warehousing and logistics space?
The evolving international geopolitical landscape and the rapid growth of last-mile delivery have caused significant shifts in global supply chains. This presents a remarkable opportunity for India to upgrade its warehousing and logistics infrastructure, diversify its supply routes, and position itself as a formidable player in the global supply chain arena. The demand for modern, efficient warehousing solutions is on the rise, driven not only by e-commerce but also by the existing manufacturing units' need to optimize their material storage areas due to space constraints.
Furthermore, FMCG and FMCD firms are transitioning from Grade B warehousing to Grade A warehousing to enhance efficiency, adhere to regulatory standards, and more. Advanced warehousing solutions can assist these companies in streamlining their supply chain activities, reducing operational expenses, and increasing overall effectiveness. As India aims to become a global supply chain hub, there is a renewed focus on modernizing and upgrading warehouses and diversifying supply routes. The current challenges present an opportunity for the warehousing industry to grow and improve, making it an attractive investment for both global and domestic institutional investors.
Current State of the Industry
India's warehousing industry has come into the limelight in recent years, attracting the attention of both global and domestic institutional investors. Although the sector has faced challenges such as inadequate infrastructure, including storage facilities, high logistics cost, and outdated technology, it presents significant opportunities for growth and development.
According to Research and Markets, the warehousing market is expected to reach INR 2,872.10 bn by 2027, expanding at a CAGR of ~15.64% during 2022-2027. Manufacturers are seeking to shift non-productive material storage areas outside their factory premises and adopt Just-in-Time (JIT) techniques to manage inventory on-site. With the changing dynamics, new-age manufacturers are increasingly turning to third-party logistics providers (3PLs) for their warehousing needs.
As India gears up for this transformational push, there is a palpable sense of anticipation around the potential impact it could have on the industry. The world is watching as India takes bold steps towards achieving its goal of becoming a dominant player in the supply chain and logistics space. With the right policies, investments, and infrastructure in place, India could become a driving force in shaping the future of global trade.
Key Industry Drivers
Government Initiatives: India's logistics and warehousing industry is set to experience significant growth with the support of government initiatives such as the National Logistics Policy (NLP) and Gati Shakti scheme. Through NLP, the government aims to bring down logistics costs and improve the logistics performance index by 2030.
Customization: Companies in the industry are customizing their warehouses to meet their clients' specific needs, from modifying warehouse layouts to adopting advanced technologies that reduce operational costs and environmental impact.
Moreover, the trend towards green practices is on the rise in the country, with many companies adopting sustainable practices such as solar panels, rainwater harvesting and many more. These eco-friendly initiatives not only reduce the environmental impact but also increase the operational efficiency and reduce costs in the long run. Furthermore, as the focus on environmental, social, and governance (ESG) factors increases globally, the adoption of ESG policies in Indian warehouses have made them more attractive to global investors.
Strategic locations: Investors' focus is not just limited to Tier 1 cities but is expanding to Tier 2 and 3 cities due to the expansion needs of third-party logistics players and adherence to international standards, along with the cost benefit. Additionally, warehouses follow local statutory compliance in nature to ensure that they comply with local regulations, further enhancing the quality of their services.
India's strategic location at the crossroads of major international trade routes makes it an ideal location for warehousing solutions. Businesses in the warehousing sector can capitalize on this growth opportunity by providing hyper-customizable warehouses to meet clients' specific requirements.
As the industry undergoes a transformational push to become a global supply chain hub, there is a lot of anticipation around the potential impact it could have on the warehousing and logistics industry. With the right strategies in place, the Indian warehousing sector can unlock its full potential and emerge as a dominant player in the global market.