India’s Falling Logistics Costs Don’t Tell The Full Story

Union Minister Nitin Gadkari said last week at the ASSOCHAM Annual Conference 2025 that India’s logistics cost will come down to single digits by December. The target, he said, was within reach because of new expressways, industrial corridors, and a growing web of logistics parks.

Industry data and expert assessments tell a different story: India’s logistics bill has fallen, but largely due to structural shifts, rather than the infrastructure push that Gadkari credits.

According to a new Department for Promotion of Industry and Internal Trade (DPIIT) and the National Council of Applied Economic Research (NCAER) assessment, India’s logistics cost stood at 7.97% of GDP in FY24 — a sharp fall from the 13–14% estimates cited for years.

Logistics costs for sectors like manufacturing and agriculture remain significantly higher, while India’s heavy dependence on roads — which still carry about 60% of all freight — keeps logistics prices stubbornly high.

“Roads matter, but so does the network that ties roads to ports, rails, and warehouses. For instance, a port like Mundra may operate efficiently, but a manufacturer in interior Madhya Pradesh can’t move goods quickly if there’s no reliable rail link or connecting highway. A standalone port alone doesn’t cut logistics costs when multimodal connectivity is weak,” Deepak Sood, former Secretary General of ASSOCHAM, told The Core.

By the Numbers: India’s Logistics Bill (FY24)

According to Sood, the trouble is that the government at the centre and in the states are not often on the same page. “We are a country of 28 state governments, several union territories, districts, and municipal corporations — all with their own priorities. Everyone’s not aligned in one direction, and that’s where delays creep in,” Sood said.

Hidden Costs

Even as infrastructure expands, India’s logistics efficiency is held back by uneven last-mile connectivity and weak integration between transport and storage networks. Large parts of the supply chain — especially in agriculture and small manufacturing — still operate outside formal logistics systems, relying on ad-hoc warehousing and fragmented intermediaries.

The result: goods take longer routes, trucks return empty, and perishable commodities often don’t reach markets on time. These invisible inefficiencies add up to what economists call the “hidden cost” of logistics — the waste that doesn’t show up in official estimates but quietly erodes competitiveness.

“When we talk about logistics costs, we usually think in terms of transport or storage costs. But we also need to account for the cost of wastage. If infrastructure isn’t available at the right place and time, large quantities of produce go to waste — that’s an indirect cost we often ignore,” R Chandrashekar, former IT Secretary, told The Core.

When it comes to perishables, logistics inefficiency hits the hardest for two reasons — temperature and time. If there’s no cold-chain continuity, products face temperature abuse.

“With something like ice cream, it’s visible — it melts and gets rejected outright. But with items like frozen fries, you don’t know until the customer cooks it and decides never to reorder. That’s not just wastage, that’s brand dilution. Then there’s shelf life — fruits, vegetables, even grocery items lose value every extra hour they spend in transit,” Mansi Mahansari, founder and CEO of JustDeliveries, a last mile logistics service in the F&B industry.

Fraught With Problems

Despite being one of the largest rail networks in the world, India’s freight rail system continues to underperform. A key constraint is that freight trains still share tracks with passenger services, limiting both capacity and speed.

The much-delayed dedicated freight corridors (DFCs) were meant to fix this. The Western DFC, connecting Dadri in Uttar Pradesh to Sanand in Gujarat, is now largely operational, while the Eastern DFC is expected to be completed by mid-2026.

So far, DFCs cover only 2,843 km, of which 2,741 route km (96.4%) are functional, only a fraction of the total railway system of about 68000 km, as of 2024.

The government is also planning additional corridors, including the East-West and North-South DFCs, under the PM Gati Shakti framework. Once completed, these corridors could shift nearly 30% of freight from roads to rail, significantly cutting logistics costs and transit time.

However, experts point out that achieving this would also require better integration of DFC terminals with ports and industrial clusters — something that remains a work in progress.

About the road network, India has seen rapid expansion over the past decade, with more than 47,000 kilometres of expressways and access-controlled highways added. Projects like the Delhi–Mumbai Expressway, the Amritsar–Jamnagar Economic Corridor, and Bharatmala Phase-II have strengthened long-haul connectivity across the country.

But the real test lies in the last mile. Feeder roads linking industrial hubs, rural production centres, and ports to these major highways remain underdeveloped, often undoing the efficiency gains of expressway networks.

Without addressing these points, logistics costs can stay stubbornly high despite record highway construction. The next big step under the Gati Shakti plan is to improve multimodal linkages — ensuring that highways, rail lines, and ports work in tandem rather than in isolation.

Ministries Need to Be Aligned

Infrastructure is critical, but having the right kind in the right place makes all the difference. That means not just big-ticket public investments like highways and ports, but also private infrastructure such as warehouses, transport fleets and logistics parks.

“For this to work, governments have to learn to coordinate better — and local governments must prioritise improvement. The truth is, we haven’t managed our cities well, whether it’s Bengaluru, Delhi, or Gurugram. Local administrations are the ones that need to work the hardest to make this logistics dream a reality,” Sood said.

Without proper coordination among agencies, infrastructure projects develop unevenly and often become costlier. Time is a critical factor, especially for private investors.

On the ground, “lack of coordination among agencies” means different government bodies are responsible for different parts of a project, and if they don’t align, delays and cost overruns happen.

For example, many Sagarmala projects face delays because land acquisition for connecting roads or rail links isn’t synchronised with port development. And even the Delhi–Mumbai Industrial Corridor faced multi-year delays in parts because environmental and forest approvals weren’t aligned with construction schedules.

“Government projects don’t usually assign a time value to money, but commercial investments do. So, delays can quickly make a project financially unviable,” Chandrasekhar said.

One key reform was to obtain all major clearances before inviting bids — a far more efficient model. Ministries responsible for roads, ports, or the environment need to work in tandem to secure approvals upfront.

“Measures like all the ministries working together to secure approvals are vital to accelerate execution and reduce uncertainty once infrastructure is operational. The Delhi–Mumbai Industrial Corridor is a great example of how such coordination can drastically cut transit time and improve logistics efficiency,” Chandrasekhar said.

Yet coordination gaps persist at the data and policy level.

Each transport-related ministry operates under its own specific mandate and therefore has to view logistics through its own institutional lens,” said Atul Sanganeria, an industry, logistics, and corridor expert.

“For instance, the Ministry of Road Transport and Highways (MoRTH) focuses on road infrastructure development, optimising per-tonne-kilometre costs, and addressing inefficiencies within the road transport network. The Ministry of Commerce has a mandate to look at EXIM logistics and how to improve India’s export competitiveness.”

India already has strong data systems — NHAI tracks congestion, Vahan and Sarathi cover truck registration, GST and iWebin record cargo movement, inland waterways track vessels, and coastal shipping rules are regularly updated.

“The country is ready in terms of data collection. The next step is centralising analysis and ensuring actionable insights for decision-making,” Sanganeria said.

Who’s Investing And Why?

While public–private partnership (PPP) infrastructure projects have been touted as a solution, in the hope of better efficiency from private players, things aren’t easy for these projects either.

Much of India’s infrastructure development is either directly funded by the government or structured through public models that rely on private capital via bidding and concession agreements.

The framework is still government-driven, operating through concessions and contracts. The same holds for ports and other logistics assets.

The government is also cautious about PPP tie-ups as such projects involve high capital costs, long gestation periods, and complex approvals. Land acquisition delays, uncertain returns, and coordination issues among multiple agencies further discourage private participation, making investors wary despite policy pushes for infrastructure partnerships.

Optimism Vs Obstacles

When the National Logistics Policy (NLP) was launched in 2022, it came with an ambitious goal — to bring India’s logistics costs closer to OECD levels, which refers to standards set by the Organisation for Economic Co-operation and Development (OECD), which studies how efficiently goods move in countries with strong infrastructure and advanced logistics systems. These 38 member nations are mostly rich, developed economies—like the USA, Germany, Japan, and South Korea—whose logistics performance is often used as a benchmark for others.

The plan was to achieve this by streamlining clearances, building stronger multimodal infrastructure, and digitising freight movement through initiatives like the Unified Logistics Interface Platform (ULIP).

“Logistics is not just about trunk routes and national expressways. It’s also about multimodal facilities, truck parking plazas, and driver-resting facilities. We often focus on expanding lanes, but congestion caused by a lack of parking or resting points effectively reduces capacity. Truck safety and efficiency are still overlooked,” Sanganeria said.

To turn that vision into reality, the government launched a series of flagship connectivity programmes — from PM Gati Shakti, the national master plan for integrated infrastructure planning, to Sagarmala, the port-led development initiative, along with DFCs, new expressways, and industrial corridor projects. Each has a sound rationale; yet, on the ground, implementation remains uneven.

Take Sagarmala, for example. The port-led growth plan identified hundreds of connectivity and terminal projects, but many are still entangled in land acquisition disputes, environmental clearances, or coordination gaps.

According to The Tribune, official replies and follow-up reports show a large share of projects stuck in preliminary stages or delayed — even as a few move forward. Simply put, the dream of seamless coast-to-inland logistics is still very much a work in progress.

PM Gati Shakti, designed to align central and state projects through geospatial data and district-level master plans, has helped accelerate planning in certain regions. Some ministries report quicker surveys and approvals. Yet experts cautioned that the platform’s effectiveness ultimately depends on how local and state institutions use it.

“The PM Gati Shakti National Master Plan looks at logistics at the cluster level. It studies the characteristics of specific areas, develops infrastructure accordingly, and aims to reduce logistics costs for that region. The government has started implementing this approach through the Logistics Division, but mainstreaming the implementation is essential,” Sanganeria added.

However, India’s federal structure adds layers of complexity. A US-style, top-down, single-rule model — often cited as ideal — is neither politically nor administratively feasible. The gap between a central master plan and hundreds of locally driven clearances lies at the heart of India’s logistics challenge.

How Have Logistics Costs Improved So Far?

“Over the past one and a half to two years, we’ve seen a gradual but noticeable decline in logistics costs — especially for inland transportation. In some locations, the drop has been quite sharp,” Goutam Gupta, tariff and shipping advisor, told The Core.

This improvement stems largely from better road conditions, upgraded highways, and stronger multimodal connectivity. Railways, too, are stepping up — with private train operators and CONCOR moving more containers, particularly along the western corridor, where double-stack trains have become the norm.

“Take Haldia, for instance. In the last year, we have reduced road movement significantly by introducing a dedicated train service between Kolkata and Haldia. That shift has cut down the number of trailers on the road, and even though rates are set by private train operators, the cost per container has dropped by about $10. It’s expected to fall further as more operators enter the market — competition always drives costs down,” Gupta added.

But lower inland logistics costs haven’t yet translated into stronger export competitiveness, and exporters are already feeling pressure from tariffs, particularly in the US.

“Reducing the total cost of landing goods overseas — which includes inland transport, freight, and other associated expenses — is critical. Competitors like Vietnam, China, and Indonesia are moving fast. Unless India brings down its logistics and transportation costs further, our exporters risk losing their edge in global markets.” Gupta said.

India needs to intensify interventions in all these dimensions—not just build big roads or ports, but integrate process and data, shift modes away from all-road, reduce dwell times and hidden inventory/administrative cost.

Author:   Zinal Dedhia

Despite new expressways and freight corridors, India’s logistics costs remain high—dragged down by weak last-mile links and patchy multimodal integration.

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logistics infrastructure last-mile Last-mile Delivery