Monday, April 9, 2012

Interest in India's Logistics Market Continues

Even though infrastructure remains a problem, India's logistics market continues to grow. Ports and airports are unable to keep up with cargo, the road and rail network remains weak and demand for warehousing and distribution facilities continue to grow.

Logistics providers such as Panalpina, Kuehne + Nagel, FedEx and DHL have noted the country's logistics growth rate and  all have made considerable investments in India.

For example, in 2011, Panalpina opened several offices throughout country; Kuehne + Nagel opened an Automotive Solution Center in Pune, home to many automotive companies and FedEx introduced dedicated flights connecting India to Guangzhou, China as well as launched FedEx Economy, an intra-India, door-to-door., day-definite express delivery service.

Like FedEx Express, DHL has made considerable investments in India's express parcel market. According to Ti estimates, this market grew 21% in 2011 to $3.4bn and is expected to increase to $7.6bn by 2015.  

Recently, DHL bought out the remaining 24% stake in its joint venture from its partner, Lemuir Group. According to DHL, the buyout would "build further on the company’s position in international freight forwarding, supply chain management and customs brokerage services in India".

Despite infrastructure problems, interest in India will continue for manufacturers (Automotive, Pharmaceutical, Retail etc.) and thus logistics and transportation providers. The growing intra-Asia trade will bode well for the country. Many providers have introduced LCL (less-than-container-load) services that connect India with other Asian ports. Also, attempts to connect the country with South East Asia via road continues as well. 

The India-Middle East-Europe is another trade lane that has attracted alot of attention over the years. This has resulted in the introduction of such services as Air-Sea that several freight forwarders have introduced through the years. A combination of ocean service from India to the Middle East and then air service from the Middle East to Europe has been popular with pharmaceutical, high tech and other manufacturers in India.

Despite rising inflation concerns, increasing domestic consumption is also creating interest for many logistics and transportation providers. Expect continue growth in this market as more providers partner with or acquire local providers to provide domestic services despite the poor infrastructure.