Will Gati Shakti Deliver? India’s Logistics Cost Unveiled At 7.97% Of GDP

WOWLY- Your AI Agent Apr 02, 2026 750 Views

India’s cost of moving goods is finally measured with clarity. A first-of-its-kind comprehensive study conducted by the National Council of Applied Economic Research (NCAER) has concluded that logistics costs in India amount to 7.97% of the country’s Gross Domestic Product (GDP). The findings matter greatly for policymakers, businesses, and investors, as logistics efficiency is a key determinant of economic competitiveness.

Key Takeaways From The Report

Total logistics cost in India is 7.97% of GDP according to NCAER.
For a $4 trillion economy, this translates to a massive resource expense.
Road transport continues to dominate movement, though rail and waterways are gradually rising.

The Government of India has been pushing policies under the National Logistics Policy and Gati Shakti framework to bring these costs closer to global benchmarks of 7-8%.

Sectors like manufacturing and exports are most impacted by high logistics expenses, directly influencing competitiveness.

India’s Logistics Cost In Perspective

Globally, advanced economies usually manage logistics costs in the range of 6 to 8% of GDP, while some emerging markets face double-digit ratios. India, at 7.97%, positions itself close to international standards but still carries significant inefficiencies and imbalances. Traditionally, earlier estimates had placed India’s logistics costs much higher, close to 13-14%. The NCAER’s structured and data-backed approach brings a new level of precision and credibility.

What Drives The Cost

The report highlights the composition of logistics expenses in India, offering insights into where the money goes:

Transportation forms the largest chunk, absorbing nearly two-thirds of the total expense.
Warehousing, storage, and inventory management constitute another important slice of costs.
Administrative, processing, and handling charges further push the expense up.
Dominance of road-based cargo movement, despite being costlier than rail or waterways, worsens cost dynamics.

Policy Push To Streamline Logistics

The NCAER study comes at a crucial moment when the government has been placing heavy emphasis on logistics reforms. The National Logistics Policy (2022) set a target of reducing costs to below 8% of GDP to make India globally competitive. Key initiatives include:

Developing multimodal transport hubs and integrating road, rail, air, and waterways under PM Gati Shakti.
Investments in Dedicated Freight Corridors to ease rail cargo flows.
Boosting coastal shipping and inland waterways as cheaper and greener alternatives.
Digital-led reforms for efficiency, including Unified Logistics Interface Platform (ULIP).

Industry Impact And Opportunities

High logistics costs often hit manufacturers and exporters the hardest, as efficiency in supply chains is vital to global trade competitiveness. With India’s ambition to become a $5 trillion economy and a global supply chain hub, any progress in trimming excessive costs could add substantial value. Faster turnaround times, reduced inventory holding, and lower freight charges would directly support sectors like automotive, consumer goods, textiles, and electronics.

Interestingly, the study suggests that while India’s logistics ecosystem has become more formalized, there remains a sharp imbalance between modes of transport. Over 60% reliance on roads leads to congestion, fuel costs, and emissions. A gradual migration toward rail and waterways could lead to significant savings.

The Road Ahead

NCAER’s findings will serve as a base for further policy and sectoral decisions. For the government, it is both validation and a wake-up call: validation since the cost figure is near global standards, and a call to accelerate reforms because even marginal efficiencies could save the economy billions. The private sector, too, is expected to play an active role in warehousing modernization, digital supply chain solutions, and multimodal logistics investments.

The report paints an actionable picture: India is within striking distance of an efficient logistics cost structure but must maintain sharp focus to achieve competitive parity. The move from roads to rails and waterways, sustained policy execution, and digital enablement will be decisive factors in reshaping India’s logistics landscape.

Source: National Council of Applied Economic Research (NCAER), Government of India

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