An air cargo shift: India competes for central link in global supply chain

With its growing economy, improving infrastructure and location between East and West tradelines — a competitive edge for connectivity and accessibility — India is on track to elevate its role in the air cargo world in the next decade. Supply chain analysts say India has the potential to become a dominant player in air logistics. However, before it can compete with other major hubs worldwide, the country must address infrastructure challenges , outdated technology and fierce competition. “Geographically, India makes sense as a major air hub for e-commerce , pharma and manufacturing,” Cathy Roberson , founder and head analyst at Logistics Trends & Insights , told Air Cargo Next . “ It is near the Middle East and Europe for time-definite shipments and, as shippers shift toward a China-Plus-One strategy, India will likely become more important.” The China Plus-One strategy encourages countries to diversify the sources of goods, minimizing supply chain dependency on China and reducing risks, according to Z2Data . It first gained global attention in 2014 as Chinese labor costs spiked. “India is on course to overtake China as the most populous country on earth, and with an average age of under 30, India has one of the youngest demographics,” DHL spokesperson Daniel McGrath told Air Cargo Next . “It overtook the United Kingdom in 2021 to become the world’s fifth-largest economy. “This demonstrates the country’s attractiveness to businesses, both in terms of access to talent and labor, and as a major consumer market for products,” he added. Growth and successes India is attracting global interest as it works to address its infrastructure challenges with plans to integrate new technology and to ramp up its airport facilities, cargo hubs and warehousing. Speakers at the EU-India Aviation Summit in New Delhi by the European Commission and India’s Ministry of Civil Aviation in April , said they are focused on “improving connectivity, promoting environmental sustainability, tackling infrastructure bottlenecks, fostering innovation and addressing regulatory issues,” Air Cargo Next previously reported. Airports Council International, which advocates for security, safety and sustainability in aviation, projects that India’s growth in aviation could increase 339% by 2041, and result in increased demand for routes to and from the European Union. [caption id="attachment_57134045" align="alignleft" width="300"] (Photo/Noida International Airport)[/caption] Supporting this growth will be at least one major airport project intended to create a multimodal cargo hub in northern India. Noida International Airport (NIA), in Jewar, is scheduled to open in late 2024 , with a warehousing and logistics zone for forwarders and operators, as well as an integrated cargo hub terminal. Located in the Indian state of Uttar Pradesh, the hub will be operated by a subsidiary of Zurich Airport International AG, Yamuna International Airport Private , Air Cargo Next reported. The project is being funded, designed and constructed by AISATS , a joint venture between Singapore-based aviation services groups SATS and Air India . Meanwhile, India Infrastructure Finance earlier this month approved $1 billion for civil aviation projects in India, including 15 new airports, according to Blackridge Research and Consulting , an India-based firm specializing in global energy transformation. Construction plans are underway for some of the airports and others are in planning phases, according to Indian property retailer MagicBricks . The following airports are planned in 15 Indian states: Shivamogga Airport, Karnataka Jewar Airport, Noida Orvakal Airport, Kurnool Mopa Airport, Goa Purandar Airport, Pune Navi Mumbai Greenfield International Airport, Maharashtra Dhalbhumgarh Airport, Jamshedpur Rajkot Greenfield Airport, Gujarat Rewa Airport, Madhya Pradesh International Greenfield Airport, Chennai Warangal Airport, Telangana Bhogapuram Airport, Andhra Pradesh Utkela Airport, Odisha Kota Airport, Rajasthan New Airport in Mizoram, Mizoram [caption id="attachment_57138959" align="alignnone" width="627"] A map of India and its major cities.[/caption] “India is envisioned to become the next logistics hub for the world, and the government is taking necessary measures to make logistics more efficient and globally competitive,” AISATS Chief Executive Sanjay Gupta said in a release. “We are aiming to develop world-class infrastructure to deliver a seamless, best-in-class cargo experience for all stakeholders.” By the numbers In 2022, India moved 3.14 million tonnes of airfreight, a 25% year-over-year increase, with projections even higher for 2023, according to Statista . Domestic Indian airlines carried 605 million tonnes of airfreight in 2022. The country’s cargo revenue is projected to be $142 billion in 2023, according to IATA, with projected air cargo tonnage of 2.5 million tonnes, according to the Trade and Transport Group, a strategy consulting firm and analytical solutions provider. While revenue projections are down 31% from 2022 due to a normalizing market post-pandemic, with lower volumes and increased capacity globally, this figure surpasses India’s 2019 airfreight revenue of $100 billion, IATA reported. Expanding market and government support Major global forwarders have invested in India during the past decade, boosting its economy and aiding supply chain growth. Government support is also gaining traction, but obstacles remain. “Infrastructure and government red tape are and have always been concerns,” Roberson said. “ DHL , UPS and FedEx have all invested in the country. DHL Express [has been involved] the longest, owning a majority in Blue Dart (renamed Bharat ). “FedEx has an equity stake in Delhivery and UPS is interested in making an acquisition in India.” DHL Global Forwarding , DHL Express , DHL eCommerce and DHL Supply Chain all have expanded business in India, highlighting the country’s potential for growth, DHL’s McGrath told Air Cargo Next. [caption id="attachment_57132428" align="alignright" width="300"] Photo / DPHL Group[/caption] “The country is already competitive in terms of labor costs,” he said. “We anticipate that its competitiveness in other areas, such as logistics infrastructure, will increase in the future. There are also specific sectors, such as technology and life sciences, seeing development.” -Daniel McGrath “DHL Global Forwarding has invested in temperature-controlled facilities to support specialized life sciences and health care airfreight services, such as in Hyderabad, which has become a pharmaceutical manufacturing hub.” Initiatives within the country, backed by government organizations seeking to cut through bureaucratic red tape, are encouraging forwarders to optimize their businesses and increase connectivity in the supply chain, McGrath added As companies invest in India, aided by government efforts, with incentives such as its Product-Linked Incentive Scheme, freight volumes can continue to grow and India’s air logistics, including its infrastructure, will grow, he said. The Product-Linked Incentive Scheme (PLI) program was developed in 2020 to drive growth in India in 14 sectors, including aviation. “The purpose of the PLI Schemes is to attract investments in key sectors and cutting-edge technology; ensure efficiency and bring economies of size and scale in the manufacturing sector and make Indian companies and manufacturers globally competitive,” according to the India Ministry of Commerce and Industry ’s website. Growing investments India is now the most populous country on the planet, the Transport and Trade Group reported in March. This has driven foreign investments in manufacturing throughout the country, the report indicated. However, “the Chinese economy is six times larger,” the data group reported. “With Indian economic and manufacturing growth expected to outperform in the near term, there are opportunities for growth increased growth in trade.” India would further benefit from a U.S. and European shift away from China and other investment opportunities, the report stated. While China has been dominant, particularly in e-commerce exports, its population size is quickly being mirrored by India, with a 2023 mid-year comparison of 1.425 billion people in China and 1.428 billion in India, according to a report by Reuters in April. “Exports [from India] in 2022 grew by almost 10% and imports by 17%. Particularly the import performance of industrial equipment, parts and supplies is an indicator of future increases in manufacturing output and exports,” according to the report. [caption id="attachment_57135860" align="alignright" width="300"] (Photo/CanStock)[/caption] The country’s location between tradelines only benefits these outputs. “ The Indian subcontinent has the advantage of both air and ocean connectivity,” Vineet Malhotra , co-founder and director at India-based Kale Logistics Solutions , told Air Cargo Next. “ Globally, the cargo business is uncertain and dropping, but in India it is growing and is very stable." -Vineet Malhotra Malhotra cited government initiatives and policies that aim to reduce logistics costs in India to take advantage of this stability, such as: National Logistics Policy, which aims t o address “soft infrastructure and logistics sector development … including process reforms, improvement in logistics services, digitization, human resource development and skilling,” according to the Ministry of Commerce and Industry; and Bharatmala Pariyojna, a road development project for $63.4 million to improve economic corridors, feeder roads as well as connectivity to airports and seaports. “There are also lots of foreign investments taking place in the sector,” Malhotra said. Logistics costs are relatively high, at 12% to 14% of the gross domestic product (GDP) compared with 6% to 8% in developed countries, McGrath said. India’s GDP in 2022 was $3.4 trillion a record, according to data from the World Bank . “Road connections between economic centers and ports/airports are, in some cases, not well developed, so transit times can still be very long,” he said. “Another factor leading to inefficiencies is the low levels of private sector ownership/involvement in certain areas of logistics, such as terminal operators.” McGrath noted as an example that “airfreight forwarders are not allowed to build ULDs [unit load devices] or airfreight pallets directly and deliver them to the airline. Cargo has to be handed over to the terminal operator, who then builds the pallets for the airlines.” Restructuring Air India Air India , the country’s flagship carrier, has undergone a renaissance in 2023, redesigning its logo and abandoning its signature colors for red, purple and yellow. Moreover, the airline, no stranger to financial and operational struggles, rolled out a five-year plan, called Vihaan.AI, to restructure. Vihaan means “dawn” in Sanskrit, an Air India spokesperson previously told Air Cargo Next. [caption id="attachment_66541" align="alignright" width="300"] Photo/ Air India[/caption] The airline is working to draw more business in the face of competition from the Middle East and other, more profitable carriers, Derek Lossing , founder and senior adviser at Cirrus Global Advisors , told Air Cargo Next . “Air India does not have a strong international network … so there is kind of a higher reliance on international or foreign carriers in India that maybe don’t have the same motivations,” Lossing said. Air India did not respond to requests for comment. The airline announced in July that it aims to grow its cargo volumes to 2 million cargo tonnes annually by 2030, an increase of 300% over its current capacity, according to a release from Air India. To this end, Air India in June signed a purchase agreement for 470 Boeing and Airbus aircraft to add to its current fleet of 120, according to a release. Opportunity in time India could become a major operator, Lossing said, but noted this may not happen within the next five years. “To the broader point, there is tremendous opportunity with growth in India just on where they are in their international developments with their export market,” Lossing said. “India actually produces a pretty significant amount of raw materials. Manufacturing has just historically been very heavily used domestically. Growth of exports will continue in India with its low-costs “whether that’s across semiconductors or other high-tech industries,” Lossing added. There is potential for a shift in India’s productivity and role in air cargo, he said. “There’s various industries that have seen success in kind of shifting production from Asia or Southeast Asia and China to India. So, I think there is a pretty positive frontier,” he said. “When you think about it, the infrastructure internally in India is still developing, but that’s not something that can’t be evolved in the next decade.” -Derek Lossing Role of technology As the air cargo industry continues to digitalize, some Indian software solutions are keeping pace, Kale’s Malhotra said. “We have positioned ourselves well in both air and maritime technology platforms and cargo community systems,” he said. “In fact, our solutions are compliant with global frameworks and national policies. Our solutions are supporting more than 85% of India’s air cargo traffic.” [caption id="attachment_57135946" align="alignright" width="300"] Credit: CanStock[/caption] Others are also making significant investments, noted by the India Brand Equity Foundation: In November 2022, Norwest Venture Partners agreed to invest $ 32 million in Cerebral Technologies , which specializes in AI, big data and enterprise cloud, among other technologies. In exchange, Norwest Venture Partners will acquire a minority stake in the company. In August 2022, a center of excellence for the Metaverse and Web3 technologies was opened in India by Coforge , a provider of digital services and solutions. More than 1,000 people will be trained to work for the company. Also in August 2022, Samsung announced expansion of its industry-academia program PRISM (Preparing and Inspiring Student Minds) across 70 engineering colleges in India. The program will educate students in AI, machine learning and IoT (Internet of Things). Technology incubator T-Hub launched the semiconductor companion of the AIC T-Hub Foundation program to develop innovation and entrepreneurship across semiconductor sector startups. Actis , a global investor in sustainable infrastructure, plans to spend more than $ 700 million to acquire and expand assets for its platform aimed at offering real estate to tenants in the life sciences and allied sectors in India. In March 2022, Toyota launched its Mirai hydrogen fuel cell car in India. The Indian Oil Corp. will be supplying hydrogen to power the car. India's top five IT firms ( TCS , Infosys , Wipro , HCL and Tech Mahindra ) added more than 122,000 employees in the first six months of 2022, nearly matching the 138,000 total employees in 2021. A downside of advancing technologies in India? Despite its “diverse and deep” capabilities in technological advancements, India remains behind other countries in implementing its technology, according to a study by United Nations University . “The high demand for skilled technocrats and domain experts has resulted in a demand-supply skill gap,” Malhotra said. Despite this, Malhotra is hopeful that new initiatives will incentivize the growth of logistics alongside appropriate support from industry leaders and the Indian government, drawing new talent and slashing costs. “The cost of logistics will significantly come down, thanks to the government initiatives and policies, as already mentioned,” he said. “India will provide a real-life case study that demonstrates how multimodal logistics can drive economic growth and significantly contribute to a country’s GDP.”

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