Will Budget’s GatiShakti Be The UPI Moment for India’s Logistics Ecosystem?

As finance minister Nirmala Sitharaman in budget 2022-23 has laid special emphasis on PM GatiShakti, the national master plan for multimodal connectivity, massive transformative changes are expected across sectors, particularly in logistics and ecommerce sectors.

The industry hailed the budget proposal saying the massive infra spend will have a multiplier effect on the economy and create employment opportunities.

The Ambitious PM GatiShakti Plan 

The INR 100 Lakh Cr PM GatiShakti project dominated the first part of the budget speech and envisions integrating the various infrastructure schemes under different central government ministries and state governments. 

These include the much-discussed Bharatmala, Sagarmala, inland waterways, dry/land ports and air travel and more. It also sees a greater role for technology in improving infrastructure and logistics efficiency across the country.

It is obvious from the budget proposal and fund allocation for infrastructure development that the government envisages a major role for the logistics and transport sector in boosting economic growth in the coming years.  The major proposals that could buoy the transport and logistics players are as follows: 

• A unified logistics interface platform (ULIP), designed with an application programming interface (API) in mind, will be developed for the efficient movement of goods through different modes 
• PM GatiShakti master plan for expressways will be formulated in 2022-23 and it will be aimed at facilitating faster movement of people and goods 
• The national highways network will be expanded by 25,000 Km in 2022-23 and INR 20,000 Cr will be mobilised through innovative ways of financing to complement the public resources
• Contracts for implementation of multimodal logistics parks at four locations through PPP mode will be awarded in 2022-23
• 100 PM GatiShakti cargo terminals for multimodal logistics facilities will be developed during the next three years

The combined focus is on enhancing the physical infrastructure of roads and transportation, and promoting digital technologies. The stress on digital logistics will lead to reduced transport cost, increased efficacy and lower inventory expenses. 

Many are calling it the UPI moment for logistics and transport tech as the unified logistics interface platform will enable smart inventory management and real-time information.

The fragmented logistics infrastructure costs the economy an estimated 14% of GDP and the National Logistics Policy estimates to bring this cost down to 10% over the next few years.

Logistics Players Say Digital Is The Way Forward

PM GatiShakti brings to the fore the importance of technology-led transportation, founders of logistics and transport tech startups said. As logistics becomes tech-driven, it will open up more business opportunities for technology startups in the supply chain. 

“PM GatiShakti is the foundation stone for the technological revolution in logistical space in India,” said Dhruvil Sanghvi, founder and chief executive officer of logistics tech startup LogiNext. 

Traditional retail chains and companies will now wake up to the need for technology adoption, right from inventory management to delivery driver management with route optimisation and real-time visibility, he added.

As connectivity improves and the cost of moving goods and people comes down, we are likely to see textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters, agri zones, etc benefitting.

Speed of service, efficiency and customer satisfaction will increase if the government executes the plan, said Yogesh Dhingra, founder, managing director and CEO, Smartr Logistics, while welcoming the budget proposal. More expressways coming in will cut the transport cost and increase the efficiency,” he explained.

In particular, the unified logistics interface platform will increase collaboration among private and public stakeholders, believes Sachin Agrawal, cofounder & COO of packaging tech company Bizongo.

According to Sanghvi, real-time tracking and inventory management, which are part of the unified logistics interface platform, will go a long way in bringing India at par with global supply-chain networks. “Leveraging technology to complement the development of infrastructure will help bring in better efficiency,” he said.  

Concurring with Sanghvi, Agarwal said integrating digital technologies into the logistics infrastructure has become an industry-wide priority to achieve faster and safer mobility of goods.

As connectivity and logistics efficiency get priority in the government scheme of things, the focus will be on planning, financing, use of technology and speedier implementation. Dhingra said infrastructure is getting a big push as airports in small cities are already being developed under UDAN and now the stress is on logistics. It should complement each other and give a further push to B2B movements in the country, he added. 

Smoother and faster transportation would also mean faster clearance at ports and lower cost. Dhingra pointed out that while logistics costs are in double digits in India, it is in single digit in developed countries.

“Several departments of the government working in unison also means that be it B2B fulfilment from warehouse to stores or B2C orders like delivery of food, grocery and services; all of these will become much easier,” Sanghvi said. 

How SMEs, Startups Stand To Gain From PM GatiShakti

Small and medium enterprises (SMEs) will be a great beneficiary of once 100 PM GatiShakti cargo terminals are developed.  Land cost is prohibitively high for SMEs and cargo terminals will now meet the warehouse needs of small and medium enterprises, noted Dhingra.

“Several departments of the government working in unison also means that be it B2B fulfilment from warehouse to stores or B2C orders like delivery of food, grocery and services; all of these will become much easier,” LogiNext’s Sanghvi pointed out about how startups might potentially benefit from the plan. 

Reduced transit cost, increased efficiency and lower inventory expenses are likely to give an impetus to the SMEs and manufacturing businesses, according to experts. Agarwal pointed out that with the practice of data exchange, MSMEs, besides startups, will also have better access to data.

The Budget also said that the railways will develop new products and efficient logistics services for small farmers and small and medium enterprises.  “One Station-One Product’ concept will be popularised to help local businesses & supply chains,” said the finance minister.

Better Last Mile Connectivity On The Anvil

While the vision and strategy look great on paper, it all depends on the execution. Experts are optimistic as the PPP model of implementation has worked so far well. 

PM GatiShakti is said to be driven by seven engines —  roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. All of these engines will work together for which IT communication is critical. Put together, the last=mile connectivity, with regard to the movement of goods and people, will become much easier and it will impact both B2B and B2C startups.