Why the Next Phase of India’s Growth Hinges on Logistics, Not IT Services

India's dependence on IT services for competitiveness worldwide has been a major driver of the country's economy and global position in the last several decades. India established itself as one of the world's biggest providers of IT and software services due to a mix of strategic benefits. A major reason behind this success is India's low-cost workforce.

The nation has managed to provide IT services at a small percentage of the expense of developed countries and has been able to draw multinationals searching for ways to save costs while accessing quality services.

The cost benefit, along with a huge number of highly educated engineers and IT experts, has been key in elevating India as an international IT giant. Moreover, India's educational system has churned out a consistent number of skilled professionals in disciplines such as computer science, engineering, and math. Institutions like the Indian Institutes of Technology (IITs) have come out with high-quality professionals.

Simultaneously, India logistics oerations from a transport-based industry into an integrated, tech-led industry, contributing approximately 13-14% of GDP, employing over 22 million people, and projected to grow from US$250 billion to US$380 billion by 2025.

In contrast, IT services, accounting for some 7-8% of GDP, with US$254 billion in FY 2023-2024, and largely focused on service exports rather than their effect on tangible infrastructure. Meanwhile, Logistics sector in India is showing more fundamental and sustaining sector for economic growth.

India Builds Strong, Smart Logistics Network

Logistics sector in India is becoming a significant and reliable part of the economy, encouraged by growth in industrialization, and the expected delivery of infrastructure projects as planned by the Indian government.  As technology and innovation develop as enabling tools, logistics networks that are efficient and support supply chain reliability will save money and support smoother export/import and domestic trade.

Logistics industry India is expected to develop, with support from the National Logistics Policy and Gati Shakti initiatives, and increasing digitalization, the major contributor to jobs, innovation, and sustainable economic growth.

The National Logistics Policy India is an important factor in potential reduction logistics costs, improving supply chain competitiveness and developing India as a global trade hub. Furthermore, the Gati Shakti logistics framework links the infrastructure of road, rail, air, and inland waterways to provide smooth transfer and faster movement of cargo.

The Policy and Gati Shakti are working to boost logistics infrastructure development logistics with a specific investment focus for multimodal parks, dedicated freight corridors, and smart warehousing resources.

All of these solutions improve overall efficiency, transparency, and resilience, which strengthen not only domestic supply chains in India, but also increases export competitiveness.

Why logistics is important for India’s growth

Efficient manufacturing exports India logistics systems are critical for integrating India into global value chains, enhancing competitiveness, and reducing freight costs, especially under the Make in India and PLI frameworks.

 A robust e-commerce supply chain India ecosystem ensures faster, reliable delivery via strategically located fulfillment centers and advanced last-mile networks. Meanwhile, warehousing sector growth India expanded its footprint in Tier-II/III cities forms a backbone for scalable logistics, driven by automation, favorable policies like the National Logistics Policy.

 The Government of India is actively promoting logistics transformation by implementing initiatives such as the National Logistics Policy India and the Gati Shakti Master Plan. These   initiatives aimed at reducing transportation costs, increasing connectivity and facilitating seamless movement of cargo traffic.

 “Warehousing is no longer just storage; it is becoming a technology-driven backbone for e-commerce, manufacturing, and retail in India,”says Kunal Gupta, CEO, All cargo Logistics

The Government of India is facilitating multimodal logistics in India, focusing on the unique attributes of road, rail, air and waterways to improve international competitiveness so that, India can improve its state of trade.  The Government is willing to support better supply chain efficiency India by, supporting technology adoption, creating digital platforms and improving physical layers of infrastructure.

Also Read: Digital Twins in Manufacturing: From Process Simulation to Operational Excellence

Impact of logistics sector on Indian economy 

The logistics sector is vital to the Indian economy.  It is the backbone for trade, manufacturing and services. The logistics sector in India is worth close to 14% of GDP and enables moving goods efficiently across vast geographic areas to support domestic consumption and competitiveness in world markets. Improvements in logistics will reduce supply chain costs, improve accessibility to markets and improve productivity in industries.

“The future of India’s logistics lies in technology adoption, AI, IoT, and automation will redefine efficiency and transparency across the supply chain.” Says Suresh Kumar, Chairman, Federation of Indian Export Organisations (FIEO)

The National Logistics Policy and Gati Shakti are examples of government initiatives to facilitate infrastructure improvements, promote multimodal logistics integration, and boost efficiencies. The logistics sector will help sustain the projected growth and job creation in the country, especially given current demand from e-commerce, manufacturing and international trade.

Future of logistics and supply chain in India

Indian logistics and supply chain sector is poised for a leap forward, solving the pressing issue of high logistics cost India. Moreover, currently around 13–14% of GDP, with transformative infrastructure and policy interventions like the National Logistics Policy, Gati Shakti, dedicated freight corridors, and multimodal parks. Simultaneously, technology adoption in logistics, spanning AI, IoT-enabled tracking, automation,

 “Logistics is the silent engine of India’s growth, when supply chains move faster and cheaper, the entire economy accelerates,” Says R. Dinesh, President, Confederation of Indian Industry (CII)

Predictive analytics, and cloud-based platforms, is enhancing visibility, efficiency, and resilience across the supply chain. Additionally, with digital transformation, the sector’s logistics employment potential is substantial: employing over 22 million today and expected to generate another 10 million jobs by 2027.

FAQ:

1. Why is logistics more critical than IT services for India’s next phase of growth?

 Efficient logistics can lower costs, attract investment, and drive inclusive growth across sectors.

2. What are the major challenges in India’s logistics sector?

The sector faces issues like high costs, fragmented infrastructure, regulatory hurdles, and limited multimodal connectivity. These inefficiencies increase supply chain delays and reduce global competitiveness.

3. How will India’s National Logistics Policy impact economic growth?

The policy aims to cut logistics costs, improve infrastructure, and enhance efficiency. This will strengthen exports, support Make in India, and boost GDP growth significantly.