Although often overlooked, the logistics and warehousing segment plays a crucial role in the economy. In India, this sector is experiencing rapid growth and development due to the rise in commercial activities, the expansion of e-commerce, and the advancement of supply chains. The primary function of the logistics and warehousing segment is to facilitate the transportation of products from their origin to the end consumers.
In this article, we will delve into the flourishing warehousing sector in India and explore the key factors fueling the growth of the Indian warehousing market.
According to a report by IBEF (India Brand Equity Foundation), the Indian warehousing market is projected to grow at a Compound Annual Growth Rate (CAGR) of 15.64% from 2022 to 2027, reaching a market size of US $34.99 billion (approximately Rs 2,872.10 billion). The warehousing sector in India has undergone a significant transformation in recent years, thanks to the introduction of modern warehouse facilities and technology-based solutions.
Increasing demand and supply have contributed to the growing momentum of the Indian warehousing industry. Notably, third-party logistics providers and e-commerce ventures are major players in this industry, expanding their presence in tier 2 and 3 cities and playing an increasingly significant role in the secondary marketplace.
Factors Boosting the Warehousing Market
Several factors are driving the growth of the warehousing market in India. Let’s explore some of these key factors:
- E-commerce: The surge in e-commerce has significantly contributed to the expansion of the warehousing segment. The increasing popularity of online shopping has created a higher demand for storage and distribution.
- Infrastructure Development: The government’s emphasis on infrastructure development in India has created a favourable environment for the warehousing industry. Investments in developing roads, national highways, and logistics parks have enhanced connectivity and improved overall logistics efficiency.
- Manufacturing Shift: The shift of international companies’ manufacturing focus to India has increased demand for warehouse options and logistics services. Initiatives like the Production Linked Incentive (PLI) scheme have further facilitated domestic production, consequently driving the need for additional warehouse facilities.
- Emergence of Startups: The market has witnessed the emergence of technology-driven logistics and warehousing startups. These innovative startups leverage new-age technologies and offer competitive products and services, contributing to the growth of the warehousing market.
Challenges For the Warehousing Market
The warehousing sector in India is witnessing investments from domestic and international players. However, several challenges need to be addressed. One of these challenges is the inadequate transportation network, which can impact the efficiency of logistics operations. Another challenge is the lack of modern facilities in many warehouse setups, hindering their ability to meet the industry’s evolving demands. Lastly, the availability of suitable land for warehouses is limited, posing a constraint on expansion.
The warehousing sector in India still faces a notable gap in adopting advanced solutions. This includes implementing warehouse management systems, automation technologies, and data analytics tools. Embracing these advanced solutions can enhance operational efficiency, inventory management, and overall supply chain performance.
Investment in the Warehouse Segment
The warehousing segment in India has witnessed significant investment activity in recent years. According to IBEF, the sector has received a total institutional investment of US $5.4 billion between 2019 and 2022, with a notable 35% share in 2022 alone.
Furthermore, a report from CNBC TV18 suggests that India will need to create sufficient supply to meet the demand for 223 million square feet of Grade-A warehousing space over the next three years.
To support such a scale of development, an equity investment of $3.8 billion will be required. This indicates a substantial investment opportunity of $2.8 billion in the near future, as estimated by CREDAI (Confederation of Real Estate Developers’ Associations of India) and Anarock.
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