As India sets its sights on a monumental economic transformation, the country aims to inject an impressive $1 trillion into its GDP every 18 months over the next six years. According to a report by IDBI Capital, this ambitious strategy will propel India to become a $10 trillion economy by 2032. Moreover, the nation is on track to clinch the title of the world's third-largest economy by 2030, a position that underscores its burgeoning global influence.
     Central to this economic strategy is a robust push to enhance the e-commerce sector, which is projected to reach a staggering $12 billion in gross merchandise value (GMV) during the festival season of October to December 2024: a 23% increase from last year, as highlighted by logistics firm Shiprocket. This rapid growth has placed India on a trajectory to outpace the United States and emerge as the second-largest e-commerce market globally by 2034. However, while the potential is immense, current e-commerce exports remain a cause for concern.      
     With annual exports valued at around $5 billion, India lags significantly behind China, which boasts a yearly e-commerce export figure of approximately $250 billion.
     To tackle this disparity, the Indian government has introduced the E-Commerce Export Hub (ECEH) initiative, a critical component of its strategy to enhance e-commerce exports. Recognizing that existing exports of around $3 to $5 billion are insufficient against fierce global competition from China, South Korea, and Vietnam, the ECEH aims to break down the barriers that have hindered India’s export growth.
     The concept was unveiled in the Foreign Trade Policy of 2023. Pilot projects were proposed at strategic locations, such as the recently selected export hub at Delhi Airport, operated by CSC (Cargo Service Centre is the largest Terminal Operator in India, handling 1.2million tons of cargo per annum from 70 International and domestic carriers) and Shiprocket. These hubs focus on streamlining operations, offering accelerated customs clearances, security checks, and inspection services, dramatically reducing the turnaround time for exporters.
     India’s Director General of Foreign Trade, Santosh Kumar Sarangi, commenting on establishing the ECEH in Delhi said the idea was to start with a pilot project selecting logistics aggregator Shiprocket and Cargo Service Center to set up the export hubs and begin operation February 2025. The scheme would be implemented on a wider scale based on the project's learnings.
     Sarangi also pointed out that the ECEH would be the key to not only further exports from India but also allow exporters from the hinterland to send out a variety of goods like pharma products, textiles, home textiles, apparel, jewellery, and beauty products.
     These export hubs are designed to address various logistical challenges small businesses face, ensuring predictable turnaround times and ease of re-importing goods without incurring import duties. In an ecosystem where compliance with Goods and Services Tax (GST) and customs clearances can significantly delay shipments, the proposed dedicated zones within the export hubs will house customs officials to provide real-time clearances, thereby cutting down red tape.
     With an anticipated 80 million new online shoppers by 2025, bringing the total to 125 million, the Indian e-commerce landscape is expanding rapidly. The government's initiatives look to leverage this growth, providing micro, small, and medium enterprises (MSMEs)—the backbone of India's digital marketplace—with access to international markets. By consolidating logistics and compliance processes, the ECEH initiative offers a structured approach to mitigating the operational challenges faced by smaller exporters.
     The benefits of the ECEH model are being recognized across the industry. Experts from NASSCOM (the National Association of Software and Service Companies or NASSCOM is an Indian non-governmental trade association and advocacy group that primarily serves the Indian technology industry and serves as a key entity within the Indian technology sector) have lauded the proposal, viewing it as a decisive movement toward articulating a more streamlined e-commerce export framework. By integrating customs and fulfillment functions, the ECEH initiative is set to provide standardized procedures that could significantly shorten compliance timelines and elevate India's standing in the global e-commerce arena.
     Tushar Jani, Group Chairman, Cargo Service Center and founder of Blue Dart has always advocated government-industry tie-ups to boost cargo. He is of the view that while the airport infrastructure in metro cities was good enough to handle 10 MMT, there should be a different strategy for cargo to arrive at main gateways to extract the efficiency of wide-body aircraft, which will bring down the cost and uplift will be faster and seamless. This, Jani believes, will help achieve freight tonnage targets.
     With projections estimating India's e-commerce export potential between $200 to $300 billion by 2030, there's a palpable excitement surrounding the future of the sector. Whereas China's e-commerce exports account for 6.4% of its total merchandise exports, India's figures stand at just 1.14%. However, with substantial industries like Amazon, DHL, and Shiprocket closely monitoring these developments, stakeholders across the board are optimistic about the potential of the ECEH initiative to transform India's e-commerce landscape.
     Even as the first steps for the export hubs initiative start, India’s cargo carriers are chalking out plans to leverage the rise in exports. Air India, for instance, is keen to start its freighter unit soon. With four airlines – Air India, Vistara, Air India Express, and Air Asia – under its belt, the airline believes that the time is opportune to start freighter services.
     Air India has plans to add dedicated freighters to meet the growing cargo demand. A recent report pointed out that the airline could hive off the cargo segment into a subsidiary to unlock its full potential. However, it is not clear when that would happen and no one from the Air India management has commented officially about the cargo plans.
     However, not too long ago, reports appeared about the start of consolidation and streamlining of the entire network of all four airlines. The national carrier has also begun to develop software for cargo that will focus on cargo demand and revenues. Simultaneously, moves have begun to boost the carrier’s global distribution network and bring in new customers.
     In fact, Air India mentioned the development of new software and network optimization that will see the creation of a global program to onboard, engage and expand with regional, national and global customers.
     Meanwhile, IndiGo, the country’s largest airline by fleet size and passengers carried, is expecting a 17% growth in cargo operations in this financial year largely due to boost in demand on domestic and international routes. The airline handled 387,047 tonnes of cargo last year, which it expects to rise to 453,627 tonnes in the ongoing financial year, according to executives who requested anonymity.
     IndiGo CEO Pieter Elbers, speaking to top business daily, The Economic Times, said that IndiGo’s goal was to become a major global airline by 2030. With its A350 wide-bodies coming in 2027, the airline will expand its cargo capacity.
     It might be pointed out that data from Freightos from 2020 to 2023 shows unprecedented growth in India’s air cargo sector. The country has potential to become a major global exporting hub. According to the data, eBookings saw a whopping increase of 6168% by the end of Q4 2023. It was a clear signal of a major shift towards digital processes. To add to that, the percentage of participating airlines increased by 1100%, a clear sign of widespread industry adoption. Also, the active IATA numbers grew by 2356%, reflecting large scale market participation. All this while active users increased by 2608%, pointing to broader engagement across the sector.
TG