KOTRA: "Korean Companies Must Seek Opportunities in India's Road and Rail Infrastructure Policies"

Publication of the Report on 'India Logistics Infrastructure Market Trends and Entry Strategies'

[Asia Economy Reporter Park Sun-mi] KOTRA forecasted on the 24th through the report titled ‘India Logistics Infrastructure Market Trends and Entry Strategies’ that with the promotion of logistics industry development in India, opportunities for Korean companies to export construction equipment and participate in infrastructure modernization projects will expand.

The report includes the current status of infrastructure construction and project trends by logistics sector in India, as well as an analysis of investment attraction policies. India’s cargo volume is rebounding centered on railways and ports along with economic recovery. Railway freight volume increased by 15% in 2021 compared to the previous year, and by 9.4% in April 2022 compared to the same month the previous year. Cargo volume at 12 major ports also increased by 7.1% in 2021 compared to the previous year.

India’s logistics costs stand at about 14% of GDP, which is higher than other advanced countries such as BRICS (11%), the United States (8%), and Europe (10%). Accordingly, the Indian government has adopted logistics cost reduction as a key agenda to strengthen national export competitiveness and is promoting related policies.

As part of this, Prime Minister Modi announced the ‘Infrastructure Revival Plan’ in 2021. The plan aims for manufacturing-centered economic growth and logistics cost reduction through infrastructure modernization, selecting roads, railways, and aviation as seven core growth engines. To build modernized infrastructure, projects such as the ‘Dedicated Freight Corridor Project’ connecting all over India and the ‘Bharatmala Highway Construction Plan’ are underway.

In particular, infrastructure modernization in the port and railway sectors is noteworthy. In the port transport sector, which requires modernization due to low digitalization and mechanization, the government is promoting the ‘Sagarmala Project’ to strengthen port connectivity and develop coastal communities. In the railway industry, in line with the global ESG trend, an electrification policy is being implemented. The number of electrified routes from 2014 to 2021 increased more than fivefold compared to the previous seven years.

Investment attraction policies are also being implemented. Although vast financial resources are required for infrastructure construction, India’s fiscal deficit stands at about 6-7% of GDP, making it necessary to attract private and foreign investment. Recently, in the road infrastructure sector, import duties on construction equipment were reduced from 28% to 18%, and in the port sector, to privatize shipping, a 10-year tax exemption benefit is provided to inland waterway and inland port development, maintenance, and operation operators.

KOTRA diagnosed that based on technology that meets local demand, it is promising for Korean companies to enter the logistics infrastructure market. High-speed trains with strong demand in India’s railway industry and smart systems within airports are representative examples. Additionally, it advised considering various entry opportunities such as joint ventures and public-private partnerships by utilizing India’s foreign investment attraction policies.

Bin Jun-hwa, head of KOTRA’s South Asia Regional Headquarters, stated, “India is striving to develop modernized infrastructure to maintain its current steady economic growth and make a new leap forward,” and added, “Our companies will be able to capture various opportunities through India’s infrastructure demand in roads, railways, and various incentives.”

This content was produced with the assistance of AI translation services.