SOCIO-ECONOMIC VOICES

Revolutionizing India's Logistics Sector: The Power of Industrial Corridors and Technological Innovations
-Atul Sanganeria,Industrial Corridor and Logistics Expert (Independent)
"India Should be Better Leveraging Innovation and Regional Cooperation to Further Drive its Efficiency in the Logistics Landscape"

Intro: India's quest for industrial growth, innovation, and skill development hinges on the strategic development of industrial corridors. These interconnected zones, located near major urban centres and bolstered by robust transport networks, are set to transform India's logistics landscape. This week at Socio-economic Voices, Atul Sanganeria, Industrial Corridor and Logistics Expert (Independent) delves into the key points, highlighting the significance of industrial corridors and the role of technology in revolutionizing India's logistics sector. An exclusive with Senior Journalist Mahima Sharma at Indiastat. Take a read…

MS: What steps do you think the Indian government can take to encourage the development of new industrial corridors in India? What are the potential benefits of such development?

AS: The Government of India and state governments conceptualized industrial corridors across the country to stimulate industrial development in the country by facilitating investment, fostering innovation, enhancing skill development in India, and building best-in-class manufacturing and urban infrastructure. Industrial corridors aim to transform a particular geography into thriving industrial clusters or zones that are interconnected by multimodal transport networks and supported by a well-developed urban ecosystem. An "arterial" modality, such as a highway or railroad serves as the spine of the corridor and receives "feeder" roads or railways for connecting the defined area. Most corridors are strategically located close to ports to help the movement of goods for import and export.

Building industrial corridors is an effective way to enhance India’s manufacturing competitiveness. A corridor approach is built around a spine of multi-modal connectivity that allows synchronized economic and spatial planning to connect production and consumption centres, trade getaways like ports, and airports and allow us to reap optimal benefits of developing quality urban centres that provide better-skilled labour force and knowledge workers to industrial clusters. Building skills aligned with the demand for labour in the manufacturing sector while decreasing the informal nature of employment is essential. Digitalization of business processes and regulations also helps to increase productivity and facilitate private investment. Finally, the mobilization of long-term finance through the provision of catalytic long-term funding could support economic corridors.

The new industrial corridors in India have been developed around the traditional urban and growth centres, such as Delhi, Mumbai, Bangalore, Vizag, Kolkata, Chennai, Bhubaneswar and Guwahati. Key national highway (NH) and rail routes, including the dedicated freight corridors in India (DFCs), airports, and waterways form the backbone of these corridors providing connectivity to gateways for both international and domestic trade. Inter-linked corridors help to optimize costs due to the availability of wider options of gateways and markets while making long-distance trade viable spanning the entire country.

The Mumbai Delhi Industrial Corridor (DMIC) and Amritsar Kolkata Industrial Corridor (AKIC) are along DFCs and NH48 and NH19 respectively are connected around the national capital region (NCR) of Delhi. Beyond Mumbai, NH48 continues to serve as the spine for the Bengaluru-Mumbai Economic Corridor. Bangalore connects three corridors – Bangalore Mumbai Industrial Corridor

BMIC), Kochi Bangalore Industrial Corridor (KBIC) and Chennai Bangalore Economic Corridor (CBEC). This helps access multiple gateway ports and airports to support the economic/industrial development along these corridors. On the eastern side of the country, ADB is working closely with GoI on the development of the East Coast Economic Corridor (ECEC), India’s first coastal corridor2. This stretches from Kolkata to Kanyakumari mostly along NH-16 as the main transport spine. ECEC comprises four segments in the four states it passes: Vizag-Chennai Industrial Corridor (VCIC) in Andhra Pradesh; Chennai-Kanyakumari Industrial Corridor (CKIC) in Tamil Nadu; the Odisha Economic Corridor (OEC) and the West Bengal Economic Corridor (WBEC). These segments feed into and complement each other in terms of both demand and supply. The North East Economic Corridor is an extension of the ECEC and assumes special significance to steer growth in the north-eastern region (NER) of India. The overlap of corridors provides an opportunity to take advantage of synergies across various forms of infrastructure developed as part of other corridors.

The Indian Government through the NICDC program has already been proactively taking bold reforms in developing industrial corridors across the country. They are following a unique model of development where states are made partners to develop critical nodes along transport spines which would be engines of growth. States provide land as equity and NICDC provides an equal contribution to developing internal infrastructure. Industrial corridors will help stimulate manufacturing, generate jobs and promote inclusive growth.

Speaking of the potential benefits, developing new industrial corridors in India can bring about the following advantages…

Economic Growth: Industrial corridors act as catalysts for economic growth of India. They attract investments, promote industrial development, and stimulate production. This leads to increased job opportunities and overall economic prosperity.

Regional Development: Developing industrial corridors helps in achieving balanced regional development. By attracting industries to previously underdeveloped areas, these corridors reduce regional disparities and create opportunities for local communities to benefit from industrialization.

Infrastructure Development in India: The establishment of industrial corridors necessitates the development of robust infrastructure. This not only benefits the industries but also improves connectivity, reduces transportation costs, and enhances efficiency in the transportation and logistics sector.

Export Promotion: Industrial corridors provide a favourable environment for export-oriented industries. With increased production capacities, improved logistics, and access to global markets, these corridors can boost exports. This contributes to foreign exchange earnings and helps in narrowing the trade deficit.

MS: How can India enhance its logistics sector to be globally competitive? What measures can be taken to improve the financing and infrastructure of the logistics sector?

AS: The Indian government has already taken bold reform measures like PM GATI SHAKTI initiative and National Logistics Policy to enhance the efficiency and competitiveness of India’s Logistics sector globally. These cater to the coordinated and holistic development of infrastructure to avoid cost and time overrun and more scientific planning by reducing duplication and making it more demand-driven. The National Logistics Policy aims to improve India’s global ranking to amongst the top 25 countries by 2040. India needs to take both hard infrastructure measures to upgrade logistics infrastructure and more importantly, increase private sector participation in the logistics sector. This can be done by undertaking and implementing domestic and EXIM policies pertaining to warehousing, MMLPs, and various modes.

To enhance its logistics sector and achieve global competitiveness, India can take several measures aimed at improving financing and infrastructure. Firstly, the government can focus on increasing investment in logistics infrastructure, such as ports, roads, railways, and airports. This would facilitate smoother movement of goods, reduce transportation costs, and enhance overall efficiency. Notably, the government has allocated a substantial budget for infrastructure development in Inia. In the financial year 2021-2022, the total allocation for the Ministry of Road Transport and Highways was approximately INR 1.18 lakh crore ($16 billion). The total expenditure of the Ministry in 2023-24 is estimated at Rs 2,70,435 crore. This is 25% higher than the revised estimates for 2022-23.

Additionally, promoting public-private partnerships (PPPs) can attract private-sector investments in logistics infrastructure. The implementation of initiatives like the Bharatmala Pariyojana, with an investment of INR 5.35 lakh crore ($72 billion), focuses on road infrastructure development and enhances connectivity. Improving access to finance for logistics players is crucial. The government can facilitate easier access to credit through initiatives like dedicated logistics-focused funds and schemes. Furthermore, encouraging digitalization and technology adoption in the logistics sector can streamline operations, improve tracking and tracing capabilities, and reduce administrative burdens.

MS: With the growth of e-commerce and online retail, India's logistics sector must adapt in a better way to meet the changing demands of the market. What government policy changes are required to facilitate this transformation?

AS: India moves up six positions to rank 38 out of 139 nations in the 7th edition of the Logistics Performance Index (LPI 2023). But that isn't enough. To facilitate the transformation of India's logistics sector in response to the growth of e-commerce and online retail, several government policy changes are required. I am sharing some key areas that need attention as a top priority:

Infrastructure Development: The government should prioritize investments in infrastructure, including roads, highways, ports, and warehousing facilities. Upgrading and expanding these essential elements will enhance connectivity and ensure seamless movement of goods across the country.

Regulatory Reforms: Streamlining regulatory procedures and reducing bureaucratic hurdles is crucial. Implementing a single-window clearance system for express cargo based on a trusted partner program for faster logistics-related approvals will save time and improve operational efficiency. Furthermore, harmonizing state-level regulations and promoting inter-state coordination will minimize bottlenecks in cross-border transportation.

Skill Development: Enhancing the skills of the workforce involved in the logistics sector is vital. The government should collaborate with industry stakeholders to create skill development programs and vocational training initiatives tailored to the specific needs of the sector. Currently, India faces a shortage of skilled logistics professionals, and addressing this gap will boost efficiency and productivity.

Digitalization and Technology Adoption: Encouraging the adoption of digital technologies, such as warehouse management systems, inventory tracking, and transportation management systems, is essential for optimizing operations. The government can incentivize the adoption of these technologies by providing financial assistance and promoting awareness campaigns. Also, there is a need to develop a robust risk management system and integrate with others like CUSTOMS, GSTN/DGFT and PGAs for faster clearances.

Last-Mile Connectivity: Improving last-mile connectivity in urban and rural areas is crucial for efficient delivery operations. The government should focus on developing infrastructure, including road networks and localized distribution centres, to ensure quick and cost-effective delivery of goods.

MS: Regional cooperation is essential for the success of industrial corridors and logistics sector development. How do you see India's relationships with its neighbours and other countries affecting these sectors in the next few years?

AS: India’s relations with its neighbors have improved drastically since 2014 and these are not just limited to regional cooperation and integration with the Eastern neighbours but also with the Western countries. In November 2021, India, Israel, the US, and the UAE (I2U2) established a new quadrilateral economic forum to focus on regional infrastructure development in India and strengthen regional cooperation. regional cooperation can bring about numerous benefits, including improved connectivity, enhanced trade facilitation, and increased investment opportunities. Some of the key initiatives include the following:

Connectivity Initiatives: India has been actively pursuing connectivity initiatives with neighbouring countries, such as the development of the International North-South Transport Corridor (INSTC) and the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicle Agreement. These initiatives aim to improve transportation links, reduce trade barriers, and facilitate seamless movement of goods. By strengthening these relationships, India can enhance the efficiency of its industrial corridors and boost trade volumes.

Foreign Direct Investment (FDI) Inflows in India: Strong diplomatic ties and positive relationships with neighbouring countries and other nations can attract higher levels of foreign direct investment (FDI) into India's industrial corridors. FDI inflows in India bring in technology, capital, and managerial expertise, which can contribute to the growth and development of the sectors. In recent years, India has witnessed significant FDI inflows- India received the highest-ever FDI inflows of US$ 84.8 billion including US$ 7.1 billion FDI equity inflows in the services sector in FY22

Trade Integration: Bilateral and multilateral trade agreements with neighbouring countries and other nations are pivotal for promoting trade integration. These agreements can lead to the elimination or reduction of trade barriers, including tariffs and non-tariff barriers, thereby facilitating smoother trade flows. For instance, India has free trade agreements with countries like ASEAN, Japan, and South Korea, creating opportunities for increased trade and investment in the region.

Logistics Efficiency: Collaborative efforts with neighbouring countries to improve cross-border infrastructure and streamline customs procedures can significantly enhance logistics efficiency. Initiatives like the establishment of integrated checkpoints and the adoption of technology-driven customs clearance systems can expedite trade processes and reduce costs. For instance, the implementation of the Goods and Services Tax (GST) in India has already resulted in reduced transit times and logistics costs.

MS: How can the logistics sector leverage innovative financing models, such as supply chain finance and factoring, to improve cash flow and reduce working capital requirements?

In recent years, the logistics sector in India has witnessed significant growth and has become a crucial component of driving India’s manufacturing competitiveness. To further enhance its efficiency and address working capital challenges, the sector can leverage innovative financing models like supply chain finance and factoring. These models provide opportunities to improve cash flow and reduce working capital requirements. I am sharing how…

  • Supply Chain Finance: Supply chain finance allows businesses to optimize their working capital by leveraging their position in the supply chain. By collaborating with financial institutions, companies can extend their payment terms while ensuring early payment to their suppliers. This not only improves cash flow for all participants but also strengthens relationships within the supply chain. According to the Reserve Bank of India (RBI), supply chain finance programs have gained traction in India, with banks offering such facilities to businesses.
  • Factoring: Factoring involves selling accounts receivables to a specialized financial institution (factor) at a discount. This allows businesses to receive immediate cash for their outstanding invoices, reducing the need for long credit periods. In India, factoring is gaining prominence, especially among small and medium enterprises (SMEs) looking to manage their working capital efficiently. The Small Industries Development Bank of India (SIDBI) provides factoring services to support SMEs.

By implementing these innovative financing models, the logistics sector can reap several benefits. One can expect an improved Cash Flow: Supply chain finance and factoring enable timely cash inflows, reducing the need for businesses to rely heavily on short-term credit or internal funds. This, in turn, improves liquidity and supports operational activities. Secondly, one gets Reduced Working Capital Requirements: With access to early payments or factoring services, logistics companies can reduce their outstanding receivables, thereby minimizing the need for excessive working capital. This allows them to allocate resources to other critical areas such as infrastructure development or technology upgrades. And lastly, it results in Enhanced Supplier Relationships: Supply chain finance promotes stronger collaboration among stakeholders by facilitating prompt payments to suppliers. By ensuring a healthy cash flow within the supply chain, logistics companies can build trust and strengthen relationships, leading to better terms, reliable services, and improved overall efficiency.

MS: How can India leverage technology, such as automation and artificial intelligence, to improve the efficiency and competitiveness of its logistics sector?

AS: India has immense potential to leverage technology, particularly automation and artificial intelligence (AI), to enhance the efficiency and competitiveness of its logistics sector. By adopting these advancements, India can address various challenges and unlock substantial benefits. Here are some key points:

Implementing automated systems in warehouses can optimize inventory management, reduce human error, and enhance order fulfilment speed. For example, Flipkart, a prominent Indian e-commerce company, has automated its warehouses using robotics and AI, leading to significant improvements in operational efficiency.

Integrating technology into transportation networks can streamline logistics operations. Real-time tracking systems, route optimization algorithms, and intelligent vehicle management can enhance delivery efficiency, minimize transportation costs, and reduce carbon emissions. The Indian logistics company, Rivigo, utilizes AI-based algorithms to optimize its trucking operations, resulting in higher fleet utilization and faster delivery times.

By leveraging big data and AI algorithms, logistics companies can gain insights into customer behaviour, demand patterns, and supply chain disruptions. This enables proactive decision-making, effective inventory management, and efficient route planning. Delhivery, a leading Indian logistics startup, employs predictive analytics to optimize its operations, resulting in improved service quality and reduced transit times.

Technology-driven solutions like delivery drones and autonomous vehicles can revolutionize last-mile logistics. These innovations can overcome challenges associated with traffic congestion and remote areas, leading to faster and more reliable deliveries. Zomato, a prominent Indian food delivery platform, has successfully tested drone deliveries, showcasing the potential of technology in improving last-mile logistics.

Digital marketplaces and platforms can connect shippers with carriers and provide end-to-end visibility and transparency. These platforms enable efficient matching of demand and supply, enhancing the utilization of logistics resources. Examples include BlackBuck and TruckSuvidha, Indian startups that leverage technology to connect shippers and transporters, resulting in optimized fleet utilization and cost savings.

MS: What are some successful examples of industrial corridors and logistics sector development in other countries that India can learn from and emulate?

AS: I am sharing a few names to answer this question of yours. By emulating the best practices from these global models, India can further its industrial corridor and logistics sector development goals, fostering economic growth, creating jobs, and enhancing its global competitiveness.

  • China's Pearl River Delta: This has been a remarkable success story. It encompasses Guangzhou, Shenzhen, and Hong Kong, creating a massive manufacturing and logistics hub. This region's coordinated development has attracted significant investment, stimulated the economic growth of India, and facilitated the seamless movement of goods. For instance, in 2022, China's Guangdong Province exported $798B, making it the 1st largest exporter out of the 31 exporters in China. This is demonstrating the immense trade potential of well-planned industrial corridors.
  • Japan's Keihin Industrial Zone: This includes Tokyo, Yokohama, and Kawasaki, has achieved remarkable success in developing a robust logistics sector. The integration of ports, airports, and advanced transportation infrastructure has facilitated efficient supply chain management. For example, in 2022, Narita International Airport reported a freight volume of approximately 2.36 million tons, including both loaded and unloaded cargo.
  • Germany's Rhine-Ruhr Industrial Region: This region, encompassing cities such as Cologne, Düsseldorf, and Duisburg, is an exemplary model for industrial corridor development. It is home to a dense network of manufacturing industries, logistics centers, and transportation infrastructure. The Duisburg Port, located on the Rhine River, is one of the largest inland ports in the world and handles substantial volumes of cargo each year.
  • Singapore's Jurong Industrial Estate: It is another notable example. This planned industrial corridor has successfully attracted high-tech industries, research facilities, and logistics operations. The estate's proximity to the Port of Singapore, one of the world's busiest ports, has facilitated seamless connectivity and enhanced trade opportunities.

MS: How can the logistics sector work collaboratively with the financial sector to achieve the goals of economic growth, job creation, and socio-economic development in India?

AS: The India logistics market size reached US$ 259.5 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 432.4 Billion by 2028, exhibiting a growth rate (CAGR) of 8.8% during 2023-2028. The warehousing, industrial, and logistics (WIL) sectors are projected to be crucial for attaining India's vision of being a US$ 5 trillion economy by FY25.

By leveraging each other's strengths and addressing key challenges, in my opinion, and expertise, the logistics and financial sectors can drive positive outcomes for the Indian economy. How? I am sharing in detail below:

Firstly, the financial sector can support the logistics sector by providing access to capital and innovative financial products. Adequate funding is essential for infrastructure development in India, technology adoption, and capacity expansion in logistics. For instance, in recent years, the Indian government has emphasized infrastructure financing through initiatives like the National Investment and Infrastructure Fund (NIIF). As of 2021, NIIF has mobilized around INR 1.2 lakh crore (approximately USD 16 billion) to invest in infrastructure projects, including logistics.

Secondly, collaboration can facilitate the implementation of technology-driven solutions in logistics. The financial sector can support the adoption of digital platforms, IoT (Internet of Things) devices, and automation technologies by providing loans, venture capital, or direct investments. These technological advancements can enhance supply chain efficiency, reduce costs, and improve overall competitiveness. India's logistics sector has witnessed significant growth in digital initiatives, with investments in logistics technology startups reaching USD 200 million in 2020.

Thirdly, the financial sector can play a vital role in promoting skill development in India and job creation in logistics. By offering tailored financial products, such as low-interest loans for vocational training programs or entrepreneurship schemes, they can empower individuals to pursue careers in the logistics sector. This, in turn, can address the issue of skill shortages and create employment opportunities. It is important to recognise that the logistics sector has employed over 20-25 million people across job roles in tier 1, 2 and 3 cities and continues to create job opportunities for the unorganised workforce in India.

Furthermore, collaborative efforts can enable the financial sector to assess and mitigate risks associated with logistics investments. By conducting due diligence and providing risk management solutions, financial institutions can instil confidence among investors, leading to increased investments in the sector. For instance, in 2020, the government launched the Indian Infrastructure Finance Corporation Limited (IIFCL), a dedicated institution to provide long-term funding and credit enhancement for infrastructure development in India, including logistics.

Note: The views expressed in the above interview are entirely personal to Mr Atul Sanganeria and independent of any organisation.

About Atul Sanganaeria

He is an Industrial Corridor and Logistics Expert (Independent). Atul is leading several efforts in reforming the logistics sector in India, working closely with critical central line ministries, the Capacity Building Commission, and logistics and industry associations to support Government's national-level programs. He has independently consulted for multilateral and bilateral organisations including the World Bank, USAID, US Department of Commerce, Department of State, UK AID, DFID, UNU-WIDER, etc.

About the Interviewer

Mahima Sharma is a Senior Journalist based in Delhi NCR. She has been in the field of TV, Print & Online Journalism since 2005 and previously an additional three years in the allied media. In her span of work she has been associated with CNN-News18, ANI - Asian News International (A collaboration with Reuters), Voice of India, Hindustan Times and various other top media brands of their times. In recent times, she has diversified her work as a Digital Media Marketing Consultant & Content Strategist as well. Since March 2022, she is also an Entrepreneurship Education Mentor at Women Will - An Entrepreneurship Program by Google in Collaboration with SHEROES. Mahima can be reached at media@indiastat.com

Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewed protagonist. The facts & statistics, the work profile details of the protagonist and the opinions appearing in the answers do not reflect the views of Indiastat or the Journalist. Indiastat or the Journalist do not hold any responsibility or liability for the same.

indiastat.comJune, 2023
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Anubha Srivastava, Ph.D., UGC NET, M. Com, CertIFR (ACCA)

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