You Cannot Lower What You Do Not Measure: The Case for an Annual Logistics Cost Number

The Editorial Desk's Position

We think the most useful thing the government could do for Indian business logistics, at little cost, is to repeat its own measurement every year and publish the method.

The Evidence for the Problem

The Department for Promotion of Industry and Internal Trade and the National Council of Applied Economic Research published, on 25 September 2025, what Outlook Business called India's first systematic assessment of logistics costs. It put them at about 7.97% of GDP in 2023-24, Rs 24.01 lakh crore. It relied on secondary data. A government official was quoted as saying it was unclear whether such studies would be repeated regularly.

Meanwhile, other numbers circulate. A KPMG India blog in January 2026 said recent government assessments put the figure at "around 8 per cent of GDP", down from 13% to 14% long cited, without naming a source or method. A page on The Statesman's website carried a teaser saying logistics cost "has dropped to 10-10.7 per cent of GDP in the Financial Year 2026", citing only "a report". Earlier estimates cited in the DPIIT-NCAER coverage were 10.9% of gross value added for 2015 and 13% of GDP for 2016, from different methods. We could find four figures in about a year, none of them comparable with another.

“A statement that logistics costs fell needs an earlier number on the same basis.”

Why It Matters

First, policy claims need a baseline. A statement that logistics costs "fell" requires an earlier number on the same basis, and there is not one. If a minister says costs have come down, nobody can check.

Second, the average hides the part that matters most. The study reported that firms with turnover below Rs 5 crore spend nearly 17% of the value of their output on logistics, and large firms about 7.6%. A national figure of about 8% describes the big firms well and the small ones badly. Small firms are where the policy problem sits.

Third, businesses plan on these numbers. A manufacturer deciding between a rail-linked and a road-based supply chain, a state deciding where to build a logistics park and an investor assessing a freight company all use the "x% of GDP" figure as a shorthand. A shorthand that changes by five percentage points depending on the source is not much use.

What We Propose

1. Repeat the study every year on the same method, with a published methodology note and a revision policy. 2. Publish a breakdown by firm size, mode (road, rail, water, air), and by function (transport, warehousing, inventory, administration), with state-level estimates where data allow. 3. Publish the data tables so that others can check and extend the work. 4. Define the term. State whether in-house logistics, inventory carrying costs and time costs are included. 5. Name a custodian, so that the number has an owner.

The Strongest Counter-Argument

The most serious objection is that a precise number gives a false sense of precision. Logistics costs are partly hidden in firms' accounts, and estimates from secondary data involve many assumptions. A regular series might be accurate in trend and wrong in level. We accept this. Our answer is that an imperfect, consistent series is better than several incomparable ones, and that publishing the method allows errors to be found.

A second objection is cost and burden. Surveys of firms take time and money, and small firms are reluctant respondents. Another reply is that the study used existing statistical tables and RBI data, which suggests an annual update is feasible without a new primary survey. We have not seen the budget.

A third objection is that the number may become a target, and targets get gamed. A government that is rewarded for a low number may define the term narrowly. That is why we propose a published definition and a published breakdown, which make gaming easier to spot.

What Would Change Our Mind & Practical Action

What would change our mind: If those responsible for the study showed that annual updates would be less reliable than a less frequent, more thorough survey, we would accept a two- or three-year cycle with an annual indicator in between. If the evidence showed that small firms' logistics share is not as high as 17%, we would drop that argument.

What businesses can do now: Do not wait. Measure your own number: freight, warehousing, packaging, handling, insurance and losses, divided by sales. Our practical guide in the Logistics package gives a method. If you are near the 17% figure, you have found a saving. If you are near 7.6%, you have found a benchmark.