CHICAGO : Despite growth, India’s logistics sector faces challenges like unfavourable inter-modal mix, inefficient fleet usage, material handling inefficiencies, road congestion and procedural bottlenecks, according to Chicago-headquartered accounting firm Grant Thornton.

The growth of the logistics sector is likely to support India’s journey to become a prominent player in the global economy, the firm’s Indian arm noted in an insight piece.

India needs to raise its production capacity, optimise infrastructure efficiency and address domestic and global demands to become the world’s third-largest economy by 2027, it said.

The manufacturing sector, contributing approximately 17 per cent to the country’s gross domestic product (GDP), is expected to play an even more substantial role in the future, supported by government initiatives.

The rise in production, however, will create additional strain on logistics infrastructure, demanding enhanced efficiency and availability to maintain competitive logistics costs, it observed.

India’s logistics sector is growing steadily at a rate of 10-12 per cent year on year (YoY), contributing 14.4 per cent to the GDP. The warehousing storage sector is growing faster, projecting a compounded annual growth rate of 15.64 per cent and a market size of $35 billion by 2027.

The global demand outlook is favourable now, offering Indian businesses the opportunity to enhance supply-side indicators and compete on a global scale, the company observed.