Indian logistics industry to grow to $125 billion by 2010

India's third-party logistics (3PL) market is all set to experience a period of explosive organic growth, going by independent market analyst Datamonitor's latest research.

The report, India Logistics Outlook 2007, predicts high double-digit growth rates for both outsourced and contract logistics in India. With India's gross domestic profit (GDP) growing at over 9 per cent per year and the manufacturing sector enjoying double digit growth rates, the Indian logistics industry is at an inflection point, and is expected to reach a market size of over $125 billion in year 2010.

"Strong growth enablers exist in India today in the form of over $300 billion worth of infrastructure investments, phased introduction of value-added-tax (VAT), and development of organized retail and agri-processing industries", say Praveen Ojha, logistics analyst with Datamonitor and author of the study. "In addition, strong foreign direct investment inflows (FDI) in automotive, capital goods, electronics, retail, and telecom will lead to increased market opportunities for providers of 3PL in India."

However, as a result of the under-developed trade and logistics infrastructure, the logistics cost of the Indian economy is over 13 per cent of GDP, compared to less than 10 per cent in almost the entire Western Europe and North America. "As leading manufacturers realign their global portfolios of manufacturing locations, India will have to work on such systemic inefficiencies, in order to attract and retain long-term real investments."

Consumer markets to lead growth in outsourced logistics
Third party or outsourced logistics is the outsourcing of a company's logistics operations to a specialised firm which provides multiple tactical logistics services for use by customers as opposed to the respective company having a business unit in-house to oversee its supply chain and transportation of goods.