How Government Policies Are Driving Growth in India’s Warehousing Sector

India’s warehousing sector has emerged as a crucial pillar of the country’s logistics and supply chain ecosystem, driven by economic growth, digital transformation, and government-backed infrastructure reforms. Over the past decade, rising industrial activity, e-commerce expansion, and global supply chain realignments have fueled the demand for modern, technology-driven warehouses. Recognizing this, the Indian government has introduced several policies and initiatives aimed at enhancing warehousing efficiency, reducing logistics costs, and attracting domestic and foreign investments. As a result, the sector has experienced remarkable growth, with increased automation, smart warehousing solutions, and large-scale infrastructure projects transforming the landscape.

India’s warehousing industry has been on an upward trajectory, supported by robust demand and proactive policy measures. The sector was valued at approximately $12.2 billion in 2022 and is projected to grow at a CAGR of 15%, reaching $34 billion by 2027. The total warehousing space in India has expanded significantly, from 330 million sq. ft. in 2023 to a projected 500 million sq. ft. by 2027. A key driver of this growth is the booming e-commerce sector, which accounts for 25-30% of total warehousing demand, spurring the rise of last-mile delivery hubs and fulfilment centres. Additionally, warehouse leasing in Tier 2 and 3 cities has surged by 40% year-on-year, fuelled by infrastructure improvements and demand from smaller urban centres.

The cold storage and pharmaceutical warehousing segment is also witnessing rapid expansion, with the cold storage market projected to grow at an 18% CAGR due to increasing demand for temperature-controlled logistics in food and pharmaceuticals. Furthermore, the demand for Grade A warehouses, which offer modern facilities and automation, has grown from 35% in 2017 to 55% in 2023, highlighting a shift towards high-quality, technology-driven warehousing solutions. With continued investments and supportive government initiatives, India’s warehousing industry is poised to become a global leader in supply chain management and logistics efficiency.

Key Government Policies Driving Growth in India’s Warehousing Sector

1. GST Implementation and Its Impact on Warehousing: The introduction of the Goods and Services Tax (GST) in 2017 revolutionized the warehousing sector by eliminating interstate tax barriers and promoting the establishment of large, centralized warehouses.

Key benefits of GST for warehousing:

• Consolidation of Warehousing Facilities: Earlier, companies maintained multiple small warehouses across states to avoid interstate taxes. Post-GST, businesses have transitioned to fewer, strategically located large warehouses, optimizing supply chain efficiency.
• Improved Logistics Efficiency: GST has led to a reduction in transit time due to the removal of state-level check posts, enhancing overall logistics performance.
• Increased Investment: With a streamlined tax structure, the sector has witnessed heightened investor interest, driving the development of world-class warehousing facilities.

2. Infrastructure Development Under the National Logistics Policy (NLP): Launched in 2022, the National Logistics Policy (NLP) aims to improve India’s logistics efficiency by reducing costs, enhancing infrastructure, and integrating advanced technology in supply chain management.

Key initiatives under NLP:

• Multimodal Logistics Parks (MMLPs): The development of 35 MMLPs across India aims to provide seamless transportation and warehousing facilities.
• Digitization & Technology Adoption: NLP promotes digital tracking systems, AI-driven warehouse management, and automation to improve logistics efficiency.
• Reduction in Logistics Costs: The policy targets reducing logistics costs from the current 14-15% of GDP to 8-10%, making Indian businesses more competitive globally.

3. Make in India & Atmanirbhar Bharat Initiatives: The Make in India and Atmanirbhar Bharat initiatives have significantly impacted the warehousing sector by boosting domestic manufacturing and reducing dependency on imports.

Impacts on Warehousing:

• Increased Demand for Storage Space: The push for local manufacturing has led to increased demand for warehousing space for raw materials, finished goods, and supply chain logistics.
• Expansion of Industrial Corridors: New industrial corridors and economic zones have facilitated the development of state-of-the-art warehousing facilities.
• Job Creation: As warehousing infrastructure expands, it creates employment opportunities in logistics management, technology, and operations.

4. Development of Dedicated Freight Corridors (DFCs): The Indian government has been developing Dedicated Freight Corridors (DFCs) to improve cargo movement efficiency.

Benefits of DFCs:

• Faster Goods Transportation: Reduction in transit time by 50%, leading to improved supply chain reliability.
• Lower Costs: Efficient freight movement results in cost savings for businesses relying on warehousing and logistics.
• Connectivity Boost: Enhanced connectivity between ports, industrial hubs, and warehousing zones has led to better inventory management and faster distribution.

5. FDI Liberalization in Warehousing & Logistics: The Indian government allows 100% Foreign Direct Investment (FDI) in warehousing and logistics under the automatic route, attracting global players to invest in the sector.

Impact of FDI Liberalization:

• Increased Capital Inflow: Global logistics companies and warehouse developers have expanded their footprint in India, improving infrastructure and service quality.
• Advanced Warehousing Technologies: Adoption of automated storage and retrieval systems, IoT-enabled warehouse management, and AI-driven logistics solutions.
• Global Best Practices: Entry of international players has facilitated the adoption of global warehousing standards, improving operational efficiency.

Challenges in India’s Warehousing Sector

Despite significant growth, India’s warehousing sector faces several challenges that need to be addressed for sustained progress:

• High Logistics Costs: Logistics expenses in India remain high compared to global benchmarks, impacting cost efficiency.
• Land Acquisition Issues: Limited availability of affordable land near urban centers poses a challenge for developing large-scale warehouses.
• Lack of Skilled Workforce: The industry faces a shortage of trained professionals in warehouse management and automation.
• Infrastructure Gaps: Inadequate road and rail connectivity in certain regions limits smooth logistics operations.
• Regulatory Bottlenecks: Complex approval processes and inconsistent regulations across states hinder seamless expansion.

The Way Forward

To overcome these challenges and further boost the warehousing sector, the following steps can be taken:

• Investment in Infrastructure: Strengthening Road, rail, and port connectivity to enhance last-mile delivery efficiency.
• Skill Development Programs: Training initiatives to build a skilled workforce for modern warehousing operations.
• Policy Standardization: Streamlining regulations across states to create a uniform warehousing framework.
• Technology Integration: Promoting AI, IoT, and automation adoption for smarter warehouse management.
• Sustainability Focus: Encouraging green warehousing practices to reduce the industry’s carbon footprint.

Government policies have played a transformative role in driving the growth of India’s warehousing sector. With initiatives like GST, NLP, DFCs, and FDI liberalization, India is creating a robust logistics ecosystem that enhances efficiency, reduces costs, and attracts global investment. As infrastructure and technology adoption continue to evolve, India’s warehousing sector is set to become a key enabler of economic growth and global trade competitiveness.

With the government’s strong focus on warehousing development, we are leveraging these policies to enhance our logistics operations. We are expanding our footprint by investing in Grade A warehouses across strategic locations, integrating AI-driven inventory management, and adopting automation for faster order processing. Additionally, we are utilizing Dedicated Freight Corridors (DFCs) to optimize long-haul transportation, ensuring cost-effective and seamless deliveries for our clients.

To align with policy-driven advancements, we are implementing sustainable warehousing practices, including solar-powered storage units and IoT-enabled real-time tracking. Furthermore, we are prioritizing skilling initiatives to build a workforce proficient in managing automated logistics systems, ensuring efficiency and scalability in India’s evolving warehousing landscape.