India cuts logistics costs to fuel growth

India’s logistics cost, currently much higher than major economies such as the US, China and the EU, is expected to become very competitive in about five years with massive efficiency gains for the economy and Last-mile connectivity to people even in remote, central areas ministers said at the Mint Mobility Conclave on Thursday.

The accumulation of infrastructure investments in the country translates into improved mobility which should generate significant savings for the economy with logistics costs expected to drop to 10% from the current 16-18%, said union minister for road transport and highways Nitin Gadkari, the main guest of the event, said.

Several ministries are making coordinated efforts under the Prime Minister’s Gati Shakti mission to transform mobility and build modern infrastructure, a key part of India’s economic recovery strategy due to its multiplier effect.

Railways Minister Ashwani Vaishnaw, who was present on the occasion, pointed out in his special address that maintaining the increase in capital expenditure, adopting new fuels such as hydrogen and increasing the share of the railway in the transport of goods with the idea of ​​reducing logistics costs were at the top of the agenda. .

Civil Aviation Minister Jyotiraditya Scindia said in his special video address at the conclave that air travel is becoming a more common mode of transport, with growth increasingly coming from smaller towns, unlike the days when travel between metropolitan cities and overseas travel were driving growth. An approach to make mobility more accessible and ensure last-mile connectivity is at the center of government concerns, especially in border towns, the minister said.

The conclave captured the ongoing mobility revolution in the country that is having a strong impact on long-term economic growth by making transport more economical, efficient and sustainable.

Gadkari said taking India’s logistics cost to around 10% would make it comparable to around 11-12% in Europe, around 10% in the US and less than 10% in China. The minister said the use of renewable energy, including ethanol, electric mobility and liquefied natural gas (LNG)-powered trucks, will reduce all transport costs through an improved road network and interconnection between different modes of transport. It would also improve mobility, he said.

“Today, the cost of transport is very high. If we manage to reduce logistics costs to 10%, our exports will also increase by one and a half times,” the minister said.

Railway Minister Ashwani Vaishnaw said the public carrier will step up investment with at least three lakh crore per year capital allocation expected from next year.

“India should invest much more in railways. We have to invest 3 lakh crore systematically to meet the aspirations of the people and reduce the logistics costs in the country. If you look at competing economies, they have invested around 9 lakh crores over the past 30 years,” Vaishnaw pointed out.

Indian Railways saw capital expenditure jump 14% 2.45 lakh crore in the financial year 2022-23 from 2.15 lakh crore in the last financial year. An increase in capital spending could spur efforts by the railways to reorganize their operations.

Vaishnaw informed that the first hydrogen train in India could be operational by August 15 next year. The Minister of Railways pointed out that the share of Indian Railways in overall freight transport has been declining since 1950, which is the main cause for the high cost of logistics in the country.

India’s telecom market has the potential to attract new players now that the government has undertaken major reforms to improve the sector’s financial health, said Vaishnaw, who is also minister of communications, electronics and technology. some information.

Comparing the growth rates of the aviation sector with air-conditioned train travel, Scindia said air travel is increasingly becoming a common mode of transportation.

“Although this is a sector in its infancy, we are currently going through a very significant growth phase in civil aviation in India,” the minister said.

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