Budget 2025 - A benchmark for logistics?

With the global supply chain in turmoil - comeback of Donald Trump, continuation of the Russia-Ukraine conflict and no return yet to the Red Sea - exporters are clearly looking at some indicators from Finance Minister Niramala Sitharaman to ease their worries in Budget 2025 to be presented on February 1, 2025.

Merchandise exports till the third quarter of fiscal 2024-25 (April-December 2024) increased only marginally (+1.6 percent) to $321.71 billion while imports increased 5.15 percent to $532.48 billion.

Ashwani Kumar, President, Federation of Indian Export Organisations (FIEO) says: "Geopolitical tensions in the Gulf region further exacerbated logistical challenges, affecting export flows to key markets like Europe, Africa, and the CIS."

With the U.S intending to impose higher tariffs on China, the move can create a significant opportunity for Indian exports, particularly in sectors where China has previously been a dominant supplier, according to a presentation by FIEO to the Finance Minister in a pre-Budget meet.

"As per our study, we can get an additional exports of around $25 billion due to tariff war in sectors such as electronics & electricals, automotive parts & components, organic chemicals, apparel & textiles, footwear, furniture & home decor and toys," says Kumar. "For that we require increasing our presence in the U.S. with showcasing in a large number of exhibitions, buyer-seller meets and tie ups with large local associations of retailers and distributors with proactive support of the government.

"A marketing scheme to focus on the U.S. with a corpus of Rs 250 crore per year for three years may be launched to generate additional exports of $25 billion by the end of three years."

FIEO also highlighted the need for the continuation of the interest equalisation scheme to ensure more credit for exporters.

"We are remitting over $100 billion as transport service charges annually and shipping freight is a major component of the same. We are happy that the Shipping Corporation of India is acquiring additional fleets. We request to infuse more equity into it or encourage a large private sector shipping line so that a significant portion of our international trade happens through our own shipping line over a period of time. This will also secure us against supply chains during disruptions," adds Kumar.

A marketing scheme to focus on the U.S. with a corpus of Rs 250 crore per year for three years may be launched to generate additional exports of $25 billion by the end of three years.
Ashwani Kumar, FIEO

The markets will also be watching the Finance Minister's moves on the rupee, which dropped to its all-time low of 86.6475 per dollar on January 15.

The main reason behind a weakening rupee is strengthening of the U.S. dollar amid an improved macroeconomic scenario in the U.S., The Economic Times reported.

The depreciation also results in increased input costs, exchange rate volatility, inflationary pressures and increasing external debt burden, says Kumar. "While a weaker rupee may offer limited short-term benefits for exporters, it is not a silver bullet for economic growth. Rupee depreciation is driven by a combination of issues requiring a balanced and well-considered approach. Addressing these challenges strategically will be key to ensuring sustainable and inclusive growth for India."

Emkay Research, in its Budget 2025 preview note, says mild sweeteners on personal taxes and concessional corporate tax scheme for manufacturing hubs/foreign direct investments (FDIs) are likely while the Reserve Bank of India (RBI) dividend may stay solid. "We maintain that boosting asset sales (via functional infrastructure monetisation, disinvestment and strategic sales) and better resource allocation are the least growth-impinging instruments of fiscal consolidation."

Rewind Budget 2024
Infrastructure development received a significant boost with Rs 11.11 lakh crore allocated in Budget 2024, encouraging state and private sector participation to enhance economic growth.

"Significant investment the Central Government has made over the years in building and improving infrastructure has had a strong multiplier effect on the economy. We will endeavour to maintain strong fiscal support for infrastructure over the next five years, in conjunction with imperatives of other priorities and fiscal consolidation. This year, I have provided Rs 11,11,111 crore for capital expenditure. This would be 3.4 per cent of our GDP," Sitharaman said during her Budget speech on July 23, 2024.

And some key developments do indicate in that direction - Maharashtra government and Jawaharlal Nehru Port Authority (JNPA) announced the launch of the proposed Rs 76,000 crore Vadhvan Port. Kerala saw the inauguration of the Vizhinjam Port.

Indian air cargo outperformed overall world air cargo growth in 2024, with international traffic growing at 19 percent compared to a global average of 13 percent, according to the India Air Cargo Outlook 2025-2029 report by Trade Data Service of Trade and Transport group published in January 2025.

The report also projects Indian air cargo to grow annually by six to nine percent for the next five years and handle between five and 5.8 million tonnes of annual cargo by the end of 2029 compared to 3.7 million tonnes today.

All these numbers indicate trade growth and the growing need for infrastructure and investments in airports, ports and roads.

Vandana Singh, Director of Global Corporate Key Account Management, Saudia Cargo says the aviation industry is at a pivotal moment. "With rising fuel costs and increasing regulatory demands, we expect the government to prioritise infrastructure development that enhances connectivity while keeping airfares affordable. Amidst an anticipated GDP growth of 6.4 percent, this budget is an opportunity to balance fiscal responsibility with sustainable practices. We hope for initiatives that not only address immediate challenges but also pave the way for innovation in green technologies, ensuring the sector can thrive in a competitive global landscape."

Budget 2025 and expectations
All eyes will be on Sitharaman's moves on Indian Railways, which carries the bulk of Indian domestic trade. Indian Railways loaded 1,473 million tonnes of freight in 2024 (January-November), an increase of 3.86 percent compared to 2023, with Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) facilitating over 72,000 train runs.

Rizwan Soomar, Chief Executive Officer and Managing Director, DP World, Middle East North Africa and India Subcontinent is looking forward to the dedicated rail freight corridors operationalised to scale movement to/from ports and to connect production/consumption centres in India even more effectively.

"Similarly, the investments in infrastructure and facilities at ports and inland cargo terminals, too, must be encouraged and incentivised. Digitalisation and automation of freight operations could be prioritised to improve efficiency and reduce the cost of logistics.

"Sustainability is a vital, underlying aspect of the infrastructure and logistics sectors. Promoting the use of renewable energy shore power systems at India's ports and adoption of electric vehicles at ports and logistics facilities through suitable tax incentives will enhance the country’s green credentials in trade."

Digitalisation and automation of freight operations could be prioritised to improve efficiency and reduce the cost of logistics.
Rizwan Soomar, DP World

Vivek Lohia, Managing Director, Jupiter Wagons adds: "Accelerating the expansion of DFCs, including the newly introduced Central India to Coast via DFC will ensure faster, cost-efficient and reliable freight movement, significantly enhancing the global competitiveness of Indian industries.

"Increasing the average speed of freight trains to 50 kmph, deploying advanced 12,000 HP electric locomotives and increasing the length of freight trains will be pivotal in accelerating freight loading. A strategic focus on railway geography assessments for sectors such as mining, NTPC, petrochemicals, cement, steel, FCI, dry ports, fertilisers and textiles will ensure that freight operations align with India’s industrial needs. As Indian Railways progresses toward net zero carbon status, this budget can be a transformative step in driving economic growth and sustainability."

Anish Kumar Jha, Managing Director, Kuehne+Nagel India, Sri Lanka and the Maldives adds that the rail sector can play a significant role in India’s logistics landscape by expanding into packaged goods and multimodal movements. "By addressing pricing, improving infrastructure and creating direct routes to minimise damages and enhance reliability, rail can emerge as a competitive and sustainable logistics solution. Furthermore, government investments in hinterland-to-port connectivity are vital steps towards driving efficiency, lowering costs, and enhancing India’s position as a global logistics hub."

Budget 2025 can play a pivotal role by granting infrastructure status to the shipping industry, enabling access to affordable, long-term financing for port modernisation, says Girish Aggarwal, Managing Director, APM Terminals Pipavav. "Additionally, incentivising green initiatives —such as renewable energy adoption, carbon-neutral operations, and digital transformation - will empower port operators to support India’s net-zero commitments while enhancing competitiveness."

Incentivising green initiatives —such as renewable energy adoption, carbon-neutral operations, and digital transformation - will empower port operators to support India’s net-zero commitments while enhancing competitiveness.
Girish Aggarwal, APM Terminals Pipavav

Maulik Shah, Managing Director, Aditya Engimach is anticipating further support for manufacturing, particularly through the extension of the productivity-linked incentives (PLI) scheme to additional sectors and incentives for SMEs to adopt advanced technologies. "Simplifying compliance frameworks and digitising processes to reduce administrative burdens will be critical in fostering ease of doing business and driving sector-wide efficiency. Streamlining access to affordable credit, promoting sustainable manufacturing, and addressing supply chain challenges will be essential for enhancing global competitiveness."

Budget 2025 will need to prioritise the development of cold chain infrastructure and the integration of advanced technologies within the logistics sector, according to Swarup Bose, Founder & CEO, Celcius Logistics. "India’s cold chain industry, valued at approximately $ 35 billion, is vital for ensuring the quality of perishable goods. The sector is set to experience transformative growth, with projections indicating it will reach $50 billion by 2027. To sustain and accelerate this growth, we recommend the following measures - Capital support for tech adoption, tax incentives and subsidies for critical cold storage and public-private partnerships (PPPs) for agricultural cold supply chains."

E-commerce can draw attention
E-commerce can be another area of focus for the finance minister to simplify cross-border shipments. "We hope to see measures to expedite e-commerce clearances and simplify cross-border online transactions," says Gregory Goba Ble, Head, UPS India. "There needs to be increased budget allocation for the healthcare sector, which relies heavily on a robust and integrated logistics network. This will ensure efficient delivery of medical supplies and increase the sector’s overall effectiveness to cater to pharmaceutical and patient requirements.

"In the earlier budgets, the government has announced programmes and initiatives to support MSMEs and we expect that to continue. We hope MSMEs, especially in the tier 2-3 cities, are further empowered with capital and technology adoption for them to compete in global markets."

There needs to be increased budget allocation for the healthcare sector, which relies heavily on a robust and integrated logistics network. This will ensure efficient delivery of medical supplies and increase the sector’s overall effectiveness to cater to pharmaceutical and patient requirements.
Gregory Goba Ble, Head, UPS India

R.S Subramanian, SVP, South Asia, DHL Express is also expecting to see more push for e-commerce export hubs to support MSMEs. "We look forward to collaborating further with the government to simplify tax structures and customs procedures for exporters. Sustainability is an emerging focus area for all businesses, especially in international trade, and we hope that we can collaborate on these aspects as well."

Ashvini Jakhar, Founder and CEO, Prozo adds that the rapid rise of e-commerce and quick commerce has further underscored the need for robust, tech-enabled logistics solutions to meet consumer expectations for faster deliveries and seamless experiences. "As India strides toward its ambitious goal of becoming a $7 trillion economy by 2030, the logistics sector is poised to play a pivotal role in driving this transformation. The next critical step is translating these efforts into a globally competitive logistics ecosystem. This requires an intensified focus on technology integration. Advanced supply chain solutions powered by AI can boost efficiency, optimize resources and build more resilient networks.

"Green logistics practices, such as sustainable last-mile delivery systems and LNG-fuelled trucking, offer opportunities to minimise the sector’s carbon footprint. So, it is imperative to introduce measures that incentivise innovation, promote digitalisation and strengthen the foundation of India’s commerce."

Multimodal transport systems and the development of inland waterways are vital for establishing resilient and efficient supply chains, according to Nikhil Agarwal, President, CJ Darcl Logistics. "As sustainability takes centre stage, we expect the implementation of advanced policies that endorse green technologies and promote the integration of electric vehicles within the commercial fleet, utilisation of alternative fuel sources & renewable energy infrastructures enhancements, and subsidies/incentives for adopting sustainable operational methodologies."

Simplifying goods and services tax (GST), accelerating multimodal logistics parks and incentivising green logistics are essential to align with the National Logistics Policy, adds Gayomard Driver, Executive Director & Group Chief Financial Officer, Jeena and Company. "While technology will continue to be the transformative power revolutionising logistics operations and enhancing connectivity, it is equally important to focus on the training and skill development of aspiring professionals to remain competitive in the digital era."

Ravi Jakhar, Chief Strategy Officer, Allcargo Group adds: "A robust road, rail, air and waterway networks, growing network of multi-modal logistics parks, developing renewable energy infrastructure and strong digital infrastructure will further expand economic activities geographically, drive sustainability and enhance the service delivery capacity and capabilities for the logistics industry. A sustained capex push will also attract private investment in infrastructure development. However, considering long gestation, the government has to take lead in logistics infrastructure capex to boost efficiency in supply chains.

"In addition, earlier E-commerce and now quick commerce's rapid growth has underscored the necessity for agile and accelerated distribution capabilities. Therefore, the budget should propose fiscal measures to facilitate adoption of new-age technologies such as AI, automation and IoT so that the logistics industry breaks new grounds in efficiency as well as capacity utilisation and deployment."