73% Indian MSMEs see lower transport costs with tech-enabled logistics

The study, titled ‘Study of Technology-Enabled Intra-City Logistics for MSMEs,’ was released at India Habitat Centre on Tuesday. About 95 per cent of surveyed MSMEs also reported improved on-time delivery of goods, while over 61 per cent said the use of digital logistics platforms reduced the time spent on co-ordination and vehicle procurement.

MSMEs contribute nearly 30 per cent to India’s gross domestic product (GDP) and around 45 per cent of industrial output yet continue to face persistent challenges in intra-city goods movement, including high transport costs, unreliable vehicle availability and frequent delays. With more than 63 million MSME units employing over 110 million people, most operate on thin margins and depend heavily on frequent short-distance movement of small consignments within cities, the study noted.

The report was released by Member of Parliament (MP) and Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal and Swadeshi Jagran Manch Co-Convener Ashwini Mahajan. Speaking at the event, Khandelwal said lowering logistics costs would be critical for India’s growth ambitions. “A significant part of India’s logistics costs arises from road transport. Improving efficiency in intra-city logistics is essential if India is to bring logistics costs down to 4-5 per cent of GDP,” he said.

Mahajan highlighted the broader role of MSMEs and technology in India’s economic rise, noting that the country’s growing digital and innovation ecosystem had strengthened sectors ranging from payments to defence manufacturing.

Nearly 27 per cent of MSMEs surveyed reported expanding their customer base or serving wider geographic areas after gaining access to on-demand logistics, while 48 per cent said they primarily used these services for urgent or priority shipments.

However, the study flagged regulatory risks that could undermine these efficiency gains. It warned that under the proposed goods and services tax (GST) 2.0 framework, digitally booked intra-city goods transport services could be misclassified as ‘local delivery services,’ raising the applicable GST from 5 per cent to 18 per cent. Such a change could increase per-trip logistics costs by over 12 per cent, disproportionately affecting MSMEs.

C-DEP president Dr Jaijit Bhattacharya cautioned that, “If higher taxes make these services unaffordable, MSMEs lose a tool that improves efficiency and customer trust. Better clarity would ensure that technology adoption is not penalised.”

The report recommended clear GST clarification, support for gradual formalisation of small transporters through digital public infrastructure, and targeted incentives to enable a smooth transition to electric freight vehicles without raising costs for MSMEs.

ALCHEMPro News Desk (CG)