India Logistics Outlook 2007

Transcription

1 India Logistics Outlook 2007 An analysis of India and its rapidly growing logistics. This brief provides an in-depth analysis of the Indian Logistics market and forecasts of market sizes, as well as the challenges and opportunities facing companies currently operating in this country or ones looking to invest. Publication Date: March 2007

2 TABLE OF CONTENTS CHAPTER 1 EXECUTIVE SUMMARY 5 Executive Summary 5 CHAPTER 2 INDIA OVERVIEW PESTLE Summary Political: Declining in influence, Indian National Congress still holds the key to political stability Economic: Doubts over sustainability of the current rapid economic growth continues to plague the sub-continent Social: Recent economic development raises new social issues Technological: India registers an increasing technological presence globally Legal: Steps have been taken to improve the system, though a lot still remain Environmental: Concerns remain buried under economic and social problems 17 CHAPTER 3 INDUSTRY OVERVIEW 18 Overview 18 CHAPTER 4 ISSUES, TRENDS AND CHALLENGES FOR LOGISTICS Logistics Industry: From un-organized to organized Transportation Infrastructure Investments CAPEX by Logistics Service Providers VAT Implementation 25 CHAPTER 5 GROWTH DRIVERS GDP, EXIM and Infrastructure Growth Industry Verticals 29

3 FMCG 30 Auto and Auto Components 31 Textiles 33 Organized Retailing 35 Electronics 36 Pharmaceuticals 38 CHAPTER 6 INDIAN LOGISTICS INDUSTRY SEGMENTS Air Freight CEP Market Road Freight Rail Freight Sea Freight Multi-Modal Transportation and Container Logistics 55 CHAPTER 7 THE NEXT STAGE 63 Summary and Conclusions 63

4 On the other hand, since year 2000, the Indian Industrial sector has also begun to look up, and in 2006, it registered over 10% growth for the first time in decades, primarily driven by the manufacturing and capital goods segments. In the Indian manufacturing, textile plays a predominant role, while the chemical is the second largest industrial sector (12% of the GDP). However, India's influence in global trade remains low and the country represents only 1% of the world's export trade. India mainly exports engineering goods, gems & jewellery (83% of diamonds sold in the world are cut in India), textiles & fabrics, and leather goods. The major imports are oil, precious stones, chemical products and machinery/engineering equipment. India's main trade partners (export and import) are Belgium, China, Switzerland, UAE, the UK, and the US. Table 3: Logistics market drivers ranked in order of impact (India) E Industry Driver 1-3 Years 4-6 Years 7-10 years Geographic expansion of domestic markets through well spread-out domestic economic activity High High High External merchandise trade increasing the demand for multi-modal logistics Medium High High Foreign investments across various verticals driving the demand for improved SCM, transportation and logistics Medium High High Companies focusing on core operations and increasingly outsourcing their logistics function Medium Medium High Improved logistics and SCM services driving business for specialist LSPs Medium Medium High Large LSPs to gain from increased inorganic activity and consolidation in the logistics Medium Medium Medium With India s GDP growing at 9% and the manufacturing sector enjoying double digit growth rates, the logistics is at an inflection point. Strong growth enablers exist today in the form of 250 billion worth of infrastructure investments, phased introduction of VAT, and development of organized retail and agri-processing industries. In addition, strong FDI inflows in electronics, automotive, retail, telecom, and auto component manufacturing will lead to increased market opportunities for Logistics Service Providers (LSPs). India currently spends over 13% of its GDP on logistics, which is very high compared to Western Europe and North America, where logistics cost as a percentage of GDP is in the range of 8-10%. With growing global competition, improving operational efficiency has become imperative and

5 Auto and Auto Components The Indian auto has the potential to emerge as one of the largest in the world. Presently, India is the world s second largest two-wheeler market, fourth largest commercial vehicle market and eleventh largest passenger car market. With over 17% CAGR, the passenger car market is set to become the seventh largest in the world by Figure 9: India Automobile Production ( 000) CVs Cars & UVs Two-Wheelers Production ('000) The growth in domestic demand is driven by a number of factors including the rising income levels and easy availability of low-cost finance. The Auto sector is key to the Indian economy from both the perspective of economic contribution as well as that of employment generation. The sector employs 13 million people and contributes to around 17% of the direct taxes kitty.

6 Figure 17: Key Players in the Indian Logistics Industry Express Express Courier Courier Warehousing Warehousing Road express -Gati - Safexpress - TNT (Speedage) -TCI Air express - Bluedart -Gati - Safexpress Courier - Bludart - Firstflight -AFL -DTDC -Overnite - Professional couriers -CWC - DHL logistics -AFL -Om Logistics -Safex Trucking Trucking 3PL service 3PL service providers providers - Delhi Assam Roadways - Patel Roadways -DHL - Schenker-BAX - SembCorp - Panalpina -Agility

7 Figure 26: Current and Estimated Capacity hikes in Indian ports (FY04-14E) 10 Million Metric Tons Due to lower draft, the average size of the Indian ports is much smaller than prevailing sizes internationally. As most Indian sea ports consume higher time in loading and unloading operations, the ships are trapped for a much longer time, increasing the cost for shippers by 10 to 20 per cent. As the shipping has been granted an infrastructural status by the government, this is expected to give financial and tax Benefits for the much needed development in this sector in the coming years. The privatization of ports and the resultant improvement in port performance will also play a crucial role in the development of this sector.