Infrastructure status to aid growth in new cities

Mumbai: The government’s decision to accord infrastructure status to the logistics sector is expected to enable logistics-dependent sectors such as auto, cement, textiles, FMCG and e-commerce to register higher growth in tier-II and tier-III cities.

While the move will help logistics firms to raise long-term credit from banks and other financial institutions at lower rates, experts feel that the development would also boost the commercial viability of opening up business in smaller cities.

“India is already home to leading industries such as automotive components, pharmaceuticals, cement, textiles, FMCG, and e-commerce. Private sector companies across these sectors, whose operations depend hugely on warehousing and logistics, are now likely to register tremendous growth in tier 2 and 3 cities. These companies will need a stronger network of warehouses and logistics facilities in smaller cities for growth. The changed status, in turn, will boost the viability of opening up businesses in different regions, translating into more demand and growth,” said Ramesh Nair, CEO, JLL India.

The domestic logistic sector has already started attracting large investors and the latest move by the government is likely to increase the momentum going forward.

Recently, Canada Pension Plan Investment Board acquired a majority stake in IndoSpace, the warehousing and logistics real estate arm of the Everstone Group.

“Developers and several foreign private equity players are now foraying into warehouse developments across Indian cities, coming up with large-scale, high-tech warehousing/logistics spaces with state-of-the-art facilities. The relatively easier availability of land in Tier 2 and 3 cities compared to the larger metros, along with improving connectivity through infrastructure developments, make for a winning combination in these cities,” added Mr Nair.