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India’s Logistics Cost Illusion
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Good Morning. India’s logistics bill has fallen quite a bit on paper. Minister Nitin Gadkari says logistics costs will hit single digits by December; technically, they already have. Yet hidden inefficiencies and blind spots, such as last-mile roads, lack of dedicated railway freight corridors and project delays continue to pose road bumps. While we speed ahead in e-commerce, infrastructure is far from desirable.
Indian equity indices closed higher on Monday over expectations of the US and China figuring out a trade deal. The BSE Sensex closed at 84,778.84, an increase of 566.96 points or 0.67%. The NSE Nifty50 closed at 25,966.05, 170.9 points or 0.66% higher.
In other news, recovery is on the horizon for India’s automakers. Meanwhile, Gen Zs and millennials are warming up to artificial intelligence (AI).
DECODE THE NEWS
India’s Falling Logistics Costs Don’t Tell The Full Story
By Zinal Dedhia
What?
At the ASSOCHAM Annual Conference 2025 last week, Union Minister Nitin Gadkari made a bold claim: India’s logistics cost will drop to single digits by December. He credited the country’s expanding network of expressways, industrial corridors, and logistics parks for bringing that goal within reach.
But data — and industry insiders — suggest a more complicated picture.
According to a fresh assessment by the Department for Promotion of Industry and Internal Trade (DPIIT) and NCAER, logistics costs in India stood at 7.97% of GDP in FY24, sharply lower than the long-cited 13–14%. Yet experts say the decline stems more from structural changes rather than the government’s infrastructure drive.
Despite the progress, inefficiencies persist. Roads still carry about 60% of India’s freight, keeping costs high and integration weak across transport modes.
“Roads matter, but so does the network that ties roads to ports, rails, and warehouses. For instance, a port like Mundra may operate efficiently, but a manufacturer in interior Madhya Pradesh can’t move goods quickly if there’s no reliable rail link or connecting highway. A standalone port alone doesn’t cut logistics costs when multimodal connectivity is weak,” Deepak Sood, former Secretary General of ASSOCHAM, told The Core.
Sood added that coordination remains a political challenge.
“We are a country of 28 state governments, several union territories, districts, and municipal corporations — all with their own priorities. Everyone’s not aligned in one direction, and that’s where delays creep in,” he said.
Why?
Even as highways and ports expand, India’s logistics efficiency continues to be dragged down by poor last-mile connectivity and weak integration between transport and storage systems. Much of India’s supply chain — especially in agriculture and small manufacturing — still runs outside formal networks, relying on ad-hoc warehousing and local middlemen.
The result: empty return trips, longer delivery routes, and massive wastage.
The problem hits perishables the hardest. Without a consistent cold-chain, even short delays can ruin products or quietly kill repeat business.
“With something like ice cream, it’s visible — it melts and gets rejected outright. But with items like frozen fries, you don’t know until the customer cooks it and decides never to reorder. That’s not just wastage, that’s brand dilution. Then there’s shelf life — fruits, vegetables, even grocery items lose value every extra hour they spend in transit,” Mansi Mahansari, founder and CEO of JustDeliveries, a last mile logistics service in the F&B industry, told The Core.
India’s logistics bill may finally look lighter on paper — but unless the hidden inefficiencies are fixed, will the promised single-digit cost really mean smoother, faster, and cheaper movement on the ground?
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CORE NUMBER
57%
That’s the percentage of global Gen Z that use GenAI at work, according to Deloitte’s 2025 Gen Z and Millennial Survey.
Fifty-six per cent of millennials use it too, and among them, 30% use it “all or most of the time.” The most common tasks that they use AI for are: data analysis, design, writing, and project management.
A little over 60% of the people surveyed fear job losses, and about two-thirds said they’re seeking AI-resistant jobs like manual or skilled trades.
💸 Financial Pressures Dominate
The top concern for Gen Z and millennials remains the cost of living. A total of 48% of Gen Zs and 46% of millennials don’t feel financially secure, up sharply from 2024, when it was 30% and 32% respectively.
Over half said they live paycheck-to-paycheck, and a third struggle with expenses. One in three holds side jobs, predominantly for income but also to gain skills or feel more fulfilled.
FROM THE PERIPHERY
State Banks May Get 49% FDI
India is considering allowing foreign investors to own up to 49% in state-run banks — more than double the current 20% cap — sources told Reuters. The finance ministry has reportedly been in discussions with the Reserve Bank of India (RBI) for the past few months on the proposal, which is still under review and yet to be approved. The move aims to bring regulations for public sector banks in line with private lenders, where foreign ownership of up to 74% is permitted.
Impact: Raising the investment limit is expected to help state-run banks attract more overseas capital amid growing foreign interest in India’s banking sector. Recent major deals include Dubai-based Emirates NBD’s $3 billion purchase of a 60% stake in RBL Bank and Japan’s Sumitomo Mitsui Banking Corp’s $1.6 billion investment for a 20% stake in Yes Bank, later raised by another 4.99%.
Setting: India’s 8% average economic growth over the past three years has spurred demand for credit, with financial sector deals surging 127% to $8 billion between January and September.
Growth Amid Uncertainty.
The Finance Ministry’s latest ‘Monthly Economic Review’ projects strong growth for FY26 despite global uncertainty, citing robust domestic demand driven by GST 2.0 reforms, favourable monsoons, easing inflation, and monetary policy support. The report cautioned, however, that global volatility “will continue to affect external demand, presenting downside risks to growth.”
By The Numbers: The review noted that steady momentum in Q2 FY26 would sustain economic activity, even after the US imposed higher tariffs on India in August. GDP grew 7.8% in April–June 2025, prompting the IMF and RBI to raise India’s FY26 growth forecasts to 6.6% and 6.8%, respectively.
What's Next? The report said GST reforms, stable inflation, and structural initiatives to spur innovation and deregulation would continue to strengthen domestic demand and make India’s economy more resilient.
Q2 Auto Earnings
Indian automakers are expected to post a recovery in the September-quarter results, driven by robust demand for two-wheelers and tractors. According to brokerages cited by Reuters, revenue is projected to rise 10-17% year-on-year, while profits may grow about 15%.
Overview: Two-wheeler makers like Bajaj Auto and TVS Motor are set to benefit from stronger exports, favourable exchange rates, and a 12% drop in shipping costs. Tractor sales have also strengthened on the back of a normal monsoon, lower borrowing costs, and recent tax cuts. The government’s September tax concessions also lifted retail sales toward the month’s end, though growth in passenger vehicles remains muted amid supply shortages. Analysts said tax relief and softer interest rates will likely spur demand further, with the recovery expected to be more visible in the December quarter.
Context: Over the past five quarters, automakers have seen only single-digit profit growth as a result of weak consumption, the global chip shortage, and uncertainty around US tariff policies.
Beauty Goes Local!
Shiseido said it is evaluating manufacturing in India depending on scale, while Estée Lauder and The Body Shop are in talks with local partners to start production, according to an Economic Times report.
Fast Facts: High import duties — 20% basic, 18% IGST, and 10% surcharge — are prompting this shift toward local manufacturing, in addition to India’s potential as a luxury beauty market.
What This Means Going Forward: India’s luxury beauty market is projected to grow from about $800 million in 2023 to $4 billion by 2035. Global brands are expanding retail operations too: 27 foreign brands entered India in 2024, nearly double pre-pandemic levels.
PODCASTS
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On Episode 711 of The Core Report, financial journalist Govindraj Ethiraj talks to Mihir Gandhi, Partner and Leader - Payments Transformation and Fintech at PricewaterhouseCoopers Private Limited. We also feature an excerpt of journalist and author Puja Mehra’s conversation with Economist Anoop Singh in her recent episode of How India’s Economy Works.
Are Indian markets breaking out to aim for record highs?
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Why public financial management systems are critical in an era of global financial and trade uncertainty
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