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July 22, 2024

Logistics sector aims to project record of 7-9% growth in 2021-22

By Priti Naik

The logistics sector is projected to record a growth of 7-9 percent in the current fiscal year. However, this is likely to remain sensitive to risk bause of the rising oil and commodity prices amid the Russia-Ukraine conflict.

The report by credit ratings agency ICRA estimated that the sector’s growth stood at around 14-17 per cent in 2021-22 over pre-COVID levels, adding that the momentum is expected to continue in this fiscal as well.

Revenue growth over the medium-term would continue to be driven by demand from varied segments such as e-commerce, FMCG, retail, chemicals, pharmaceuticals and industrial goods coupled with the industry’s paradigm shift towards organized logistics players post GST and E-way bill implementation.

The report said that multi-modal offerings are likely to gain increased acceptance and traction going forward, given that players offering multi-modal services had more flexibility. Given these factors and the relatively higher financial flexibility available to large organized players vis-à-vis their smaller counterparts, there is potential for increased formalization in the sector going forward, the report noted.

In the last few months, there has been a sustained improvement in freight movements aided by recovery in demand across industries, increased pace of vaccination and rapid abatement of the third wave, which allowed for quick lifting of restrictions, among others, ICRA said.
However, it said that elevated commodity prices and firming freight rates are key near-term headwinds.

The margin movement shall continue to depend on consumer demand sentiments, trend in diesel prices and the competitive intensity within the industry, the report said, adding that while the larger players have managed to hike rates to a large extent in FY2022, their sustained ability to do the same remains to be seen.

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