Indian Express Delivery Services market on a roll

Country’s EDS sector grew from US$ 1.7 billion in 2012 to US$ 5.5 billion in 2020 at a compound annual growth rate of 15.8%.

By R. Chandrakanth

The Indian Council for Research on International Economic Relations (ICRIER) has projected the global express delivery services (EDS) market to increase from $263 billion in 2020 to $378 billion by 2027 and $484 billion by 2030, driven by increase in the size of the educated middle-class, digitalisation and the need of firms and consumers for fast-tracked, on-time online orders and deliveries.
The Asia-Pacific region accounted for 40% of the revenue in 2020 with India being one of the fastest growing markets.
The ICRIER report on EDS was released recently by the Indian Minister of Commerce and Industry, Piyush Goyal, who underscored the importance of logistics in becoming the centrepiece of India’s policy making in its journey towards becoming a developed nation and a leader in international trade.
“Express Delivery Services is yet to come to terms with the huge potential India holds. The scale, efficiency, and building blocks through technology must be utilized to bring down the cost in logistics. The government is taking steps in this direction through massive infrastructure development through PM GatiShakti (power of speed) for smarter and faster planning and implementation of projects, Unified Logistics Interface Platform and dedicated freight corridors.”
The government, he said, is focused on taking digital connectivity across the length and breadth of the country, with expansive network of 4G and broadband internet. “The seamless digital connectivity enabled India to deliver services on time during the COVID period by facilitating work from home. The express delivery of services through an expansive digital network created over the last eight years must be duplicated in the logistics sector for timely delivery of goods.”

Growth drivers include e-commerce expansion
Dr. Arpita Mukherjee, Professor at ICRIER and one of the authors of the report, says the current size of the EDS sector in India is small, contributing to less than 2% of the industry’s global turnover. The sector grew at a compound annual growth rate (CAGR) of 15.8 percent from USD1.7 billion in 2012 to USD5.5 billion in 2020.
The key growth drivers include the growth of e-commerce, a growing middle class, government support for digitalisation and startups, implementation of the single goods and services tax (GST), the focus on logistics sector under the PM Gati Shakti—National Master Plan for Multimodal Connectivity and the National Logistics Policy 2022, and government support for onboarding Micro, Small and Medium Enterprises (MSMEs) to digital platforms. She said that by 2047, the contribution of international express will increase to 25 percent from 23 percent.
“EDS can support India in achieving its growth targets as it embarks upon its journey towards Amrit Kaal – or India @ 2047. It identifies the regulatory, infrastructure, technology and manpower related barriers and makes recommendations on how to develop India as an express delivery hub, attract investments, and increase the contribution of the sector to the economy,” said Dr. Mukherjee.
The contribution of international express is expected to increase from 23 percent to 25 percent by 2047. Roadways and air transport contributed to a share of 55 percent and 45 percent, respectively, in 2016-17. The share of roadways may change to 50 percent, air express to 40 percent and railways to 10 percent. Development of freight corridors and the use of longhaul rail transport by express companies will be a game changer in this sector.

Just-in-time door-to-door services
The growth of EDS is related to the growth of its user industries; at the same time, user industries benefit from a modern EDS, which can provide just-in-time door-to-door services, reduce delays and enhance their global competitiveness.
The growth of cross-border EDS is related to the removal of barriers to cross-border trade and a conducive domestic policy. An efficient EDS sector can contribute significantly to reducing logistics cost in India, but to achieve the full potential of this sector, the barriers have to be eliminated or reduced and putting in place global best practices.
At present, the government is going by certain estimates which indicate that logistics cost in India stands at about 13 to 14 percent of GDP.

Further reforms required
The report identified several barriers faced by the sector and the reform requirements that can help achieve its full potential and support India’s journey towards Amrit Kaal or 2047.
One of the major barriers is the Courier Imports and Exports (Electronics Clearance) Regulation 2010 which has value limit restrictions on exports through courier/express; restrictions on import of certain commodities which require clearances from partner government agencies.
Under the Goods and Services Tax (GST) act, separate GST registration is needed for each state, undermining the concept of India as a single market or ‘one nation, one tax’. Another stumbling block is the requirement of multiple documents and electronic way (e-way) bills having short validity time.
As regards infrastructure, EDS depends on all modes of transportation and when it comes to railways, India lags behind n having dedicated freight corridors. Slow movement of trains, lack of secure uploading and downloading facilities in stations, issues related to service quality and safety of consignment are issues that need to be resolved, states the report.
Private participation is only allowed in container transportation, and express industry is unable to use the services of fast passenger trains and the concept of Roll-on-Roll-off (Ro-Ro) facility is only available at selected destinations. The scenario in road transport is different with inadequate capacities, poor riding quality, safety concerns, etc.

Lack of dedicated freight corridors
On air transport, the report mentions that lack of dedicated space for express providers at airports is still a matter of concern and parking bays are not at close proximity.
Airport operators charge a high price for the movement of shipments from/to air freight stations (AFS), besides having high and differential royalty charges. Also, with the aviation turbine fuel (accounts for nearly 40 percent of cost for airlines) costs going up, the EDS segment has to work its way around this costing.
Multiple clearances required to commission express and cargo terminals –no time bound clearance or single window clearance are other issues that the EDS industry has to deal with.

Skilled manpower
The report also points out issues related to shortage of skilled manpower/workforce at different regulatory agencies and the gaps that exist in skilling programs for the EDS sector. The report added there is a need for technology integration between agencies such as ECCS and GST Network (GSTN)/Directorate General of Foreign Trade (DGFT)/Special Economic Zone (SEZ) online, customs and PGAs, Reserve Bank of India.
Another factor that is impacting the logistics sector is the limited use of technology by micro, small and medium users.
There is a need to capitalise on ‘India Post’ which has a vast network of post offices across the country. “Our country will benefit if India Post and express delivery services industry, which is a network-based industry, can enter into collaboration and partnerships,” Dr. Mukherjee adds.
Express delivery services help to improve competitiveness of our firms and when competitiveness improves, it has a positive impact by enhancing exports, creating jobs, and getting investments. So, basically, it does everything that efficient logistics or infrastructure services do.
India needs dedicated freight corridors. While airports are being upgraded, there has to be dedicated space for courier services, fast-track clearance services and air site facility. Also, there should be loading-unloading facilities for any mode of transport – be it air or railways in stations. If you look at some of these infrastructure issues, they are handled in India at the state level.
With the penetration of e-commerce and measures taken by the government to source products from different districts, the EDS is percolating at a fast pace to Tier 2 and 3 cities. It is so convenient.