ADB approves $350mn loan to enhance India’s logistics sector

The Asian Development Bank (ADB) has approved a $350 million policy-based loan to support the Government of India’s wide-ranging reforms to strengthen and modernise the country’s logistics sector and achieve increased economic competitiveness.

The loan will finance the second subprogramme of the Strengthening Multimodal and Integrated Logistics Ecosystem Programme, which supports the government’s efforts to create a comprehensive policy, planning and institutional framework at the federal, state, and city levels, says an official release from ADB. "This builds on reforms introduced during the first subprogramme by institutionalising policies to strengthen interagency coordination as well as standardizing processes to encourage private sector investment and improve operational efficiency."

The Government of India has launched several strategic policies to address logistics sector constraints, including the Prime Minister Gati Shakti National Master Plan (PMGS-NMP) and the National Logistics Policy (NLP), the release added. "These initiatives aim to improve infrastructure, streamline processes and promote digitisation. ADB’s programme supported India’s reform efforts, which have improved India's ranking in the World Bank’s Logistics Performance Index and reduced logistics costs significantly. Key actions include the establishment of institutional arrangements for logistics planning at the state and city levels, implementation of a grain storage plan, and adoption of green transition guidelines for inland waterways."

Sameer Khatiwada, Senior Public Management Economist, ADB says: “The development of the logistics sector has a profound impact on the manufacturing sector's competitiveness. Improved logistics efficiency enhances supply chain resilience, reduces transaction costs, and boosts export competitiveness. The integration of digital technologies and standardised processes facilitates smoother movement of goods, which is crucial for manufacturing growth.”

The Indian government aims to reach $2 trillion in exports of goods and services by 2030, and the programme is helping India achieve this target by enhancing productivity and transfer of goods and reducing logistics cost while contributing to the reduction of greenhouse gas emissions, the release added.

Minister of Road Transport and Highways Nitin Gadkari said the government plans to cut India’s logistics costs to single-digit levels in the next two-three years.

Speaking at the CNBC-TV18 India Business Leader Awards in Mumbai last week, Gadkari said: "Today, the logistics cost in India is 14-16 percent. In China, it is eight percent, and in European countries and the USA, it is 12 percent. Now, because of expressways, it will be 12 hours from Delhi to Mumbai, two hours from Chennai to Bengaluru. We will reduce the logistics costs as far as speed is concerned, and I am sure that within two to three years the logistics cost will be nine percent."