India’s Logistics Cost Pegged at 7.97% of GDP in First Systematic Study

India's logistics cost is estimated to be at 7.97% of its gross domestic product (GDP), according to a joint study by the Department for Promotion of Industry and Internal Trade (DPIIT) and National Council of Applied Economic Research (NCAER).

"The aggregate logistics cost is estimated at ₹24.01 lakh crore at current prices (i.e., 2023-24 prices), derived from secondary data sources including the SUT, NAS, and RBI Balance of Payments (BoP) statements," the report said.

This total logistics cost accounts for 7.97% of India’s GDP and 9.09% of non-services output in 2023-24, it added.

This marks India’s first systematic assessment of logistics costs. However, a government official noted that it remains uncertain whether the DPIIT will carry out such studies at regular intervals.

Cost-Efficient to Costliest

Within the study, Rail logistics emerged as a cost-efficient mode, with an average cost of ₹1.96 per tonne-km. By contrast, air transportation is the most expensive, albeit the fastest, mode of freight transportation, averaging ₹72 per tonne per km, which largely limits its use to high-value, time-sensitive commodities.

On the other hand, water transportation is not only a cost-effective mode of transport but also the most environmentally friendly mode.

Despite these alternatives, India continues to rely heavily on road transport. The report highlights fuel, congestion and over-reliance on trucking as the main cost drivers. Fuel alone accounts for 42.1% of road freight expenses, exacerbated by steep diesel taxation and delays at toll plazas.

It is also concerning that logistics costs are unevenly distributed across sectors. Businesses with a turnover below ₹5 crore spend nearly 17% of their output value on moving goods, while large firms with a turnover of above ₹250 manage to keep it closer to 7.6%.

The numbers came at a time when India's logistics costs were often presented as high. Earlier, a study by AVALON Consulting, done for the Confederation of Indian Industries (CII), estimated the cost to be 10.9% of the gross value added (GVA) in 2015. Another Armstrong & Associates report, which used the Artificial Neural Network Model, estimated logistics costs to be 13% of GDP for 2016.