Freight Forwarding Market in India taking wings, on back of Government support and booming consumerism

Posted on: 25-07-2024

Freight Forwarding Market in India taking wings, on back of Government support and booming consumerism

Freight forwarding entails coordinating the transportation of goods from the shipper to the final destination. Typically managed by a third-party entity called a freight forwarder, this process involves serving as a mediator between the shipper and logistics providers. The freight forwarder is responsible for organizing shipping schedules, handling documentation, and other logistics tasks on behalf of the shipper, effectively overseeing the entire transportation process

Freight Forwarding and Logistics Industry Market Size, 2024-2030 (USD Billion)

The freight forwarding and logistics Industry is experiencing rapid growth, with its market size expanding from USD317.3 billion in 2024 to USD 484.4 billion in 2029. This growth trend demonstrates a CAGR of 8.83%, reflecting the increasing demand and evolving dynamics within the sector

Maritime India Vision for 2030

Key Stimulators

• Development of port infrastructure: Maritime Vision India – 2030 is focused towards developing India’s ports. It aims to develop distriparks, provide better hinterland connectivity, enable quicker transit routes, provide digital platforms, streamline processes and manage documentation, reduce vessel turnaround time, and enable ports to accommodate bigger ships. These increase freight forwarding activities by improving efficiency, reducing logistics costs, and attracting investments
• ‘Make in India’ initiative: The government program is focused on increasing the manufacturing sector in India and developing India into a global supply chain hub, which in turn increases freight volume. Freight forwarding companies providing movement of goods across different modes of transportation, storage, documentation, and compliance stand to benefit from this
• Government’s tax reforms: The introduction of Goods and Services Tax significantly reduced transportation time. The new tax regime reduced waiting time at inter-state check posts, reduced paperwork, improved warehousing, and reduced corruption. Freight forwarding companies are direct beneficiaries of the same
• Booming e-commerce sector: India's logistics sector is set for expansion, fueled by the growing e-commerce landscape. This surge is fueled by rising internet and smartphone usage. E-commerce's influence reaches MSMEs, providing financing, technology, and training support. Growth in e-commerce directly increases the demand for freight forwarders.
• Growth of new-age startups in freight forwarding: India has many startups that have brought venture capital into the freight forwarding industry. They provide a plurality of options to the consumers and ensure competitive pricing. The government also supports private participation in this sector under its ‘National Integrated Logistics Policy’. Some prominent startups include Shadowfax, Delhivery, Porter, Ecom Express, XpressBees etc.

Mega Trends Impacting the Industry

• Digital transformation and technological change: Adopting AI, IoT, and other digital technologies has been relatively swift in freight forwarding companies. They extensively utilize platforms and digital tools to enhance efficiency, ensure compliance, and streamline operations. Beyond merely automating processes, the emphasis is shifting towards establishing a transparent and interconnected ecosystem to enhance supply chain visibility.
• Sustainability: Sustainability is prominent in India's agenda, urging all sectors to embrace environmentally conscious solutions. With increasing awareness, leading logistics and freight companies prioritize innovative eco-friendly packaging and green logistics initiatives to minimize carbon emissions and cut costs.

Main Challenges

• Adherence to regulations and compliance: The legal framework governing international shipping is complex, with varying customs procedures and timelines at different ports, often resulting in delays and increased costs. Therefore, freight companies must prioritize updating with new regulations to maintain compliance and facilitate prompt and seamless clearances. GST also increased compliance costs for many forwarders.
• Uneven infrastructure development: Infrastructure development varies significantly between rural and urban areas, making it harder to transport goods. The government is working on schemes like ‘Prime Minister Gram Sadak Yojana’to improve roads, connect rural areas, and upgrade ports. This affects how quickly and easily freight forwarders can do their jobs.
• Fuel price fluctuations: Though many freight companies are switching to energy-efficient alternative fuel solutions, most road transportation services run on fuel. The volatility of fuel prices directly impacts costs, especially for sectors with large volumes of goods for transportation, e.g., the manufacturing sector, the construction sector, e-commerce, and the automobile sector. This poses a challenge in a market where transportation cost is already considered higher than average.

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