Intra-India air cargo is a hot growth ticket for India currently.
     A recent ASSOCHAM-Yes Bank study pointed out that domestic cargo has registered a growth of 8 percent at a CAGR during FY07-17, while international cargo grew at 6.2 percent annually during the same period.
     Factoring that air cargo in India contributes about 20 percent of airlines’ revenues, the potential for growth and profits in this sector is huge.
     Recently drivers for growth in domestic cargo include liberalization of the economy, airlines charting out new routes, reforms in government policies, and advanced technology.

The Challenges

     However, a closer look reveals that the domestic air cargo sector of India remains fragmented and faces challenges—the foremost among them namely being the lack of connectivity.
     The problem is connecting cargo volumes of Tier-2 and Tier-3 cities that lack appropriate cargo infrastructure with major cities for air transportation.

e-Tail To The Rescue

     The India e-tail sector has stepped in to some degree. The sector has the opportunity, according to market watchers, to reach a value of $76 billion by 2021. Put alongside this are the 348 million Indian Internet users, according to 2015 figures.
     Today 50 million online shoppers come from Tier-1 and Tier-2 markets in the country.
     According to the India Brand Equity Foundation (a trust established by the government’s Department of Commerce with the primary objective of promoting and creating international awareness of the ‘Made in India’ label in markets overseas and to facilitate dissemination of knowledge of Indian products and services), the country’s retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players.
     The market currently accounts for over 10 percent of the country’s Gross Domestic Product (GDP).
     The retail market is expected to grow at a Compound Annual Growth Rate (CAGR) of 10 percent to $1.6 trillion by 2026 from $641 billion in 2016. India is expected to become the world’s fastest growing e-commerce market, driven by investment in the sector and rapid increase in the number of internet users.

Booming e-Commerce

     India e-commerce sales are expected to reach $120 billion by 2020 from $30 billion in FY2016.
Further, India's e-commerce market is expected to reach $220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025.

Asia Pacific Leading The Way

     Recently Malcolm Monteiro, CEO, DHL eCommerce noted that e-commerce purchases in Asia Pacific were more than in North America and the region is currently leading the growth rate for the sector globally.
     While online retail shoppers form one side of the picture, the other is the logistical challenges.
     One of the major logistics challenges according to Monteiro is that e-commerce logistics are different from conventional logistics since everything happens outside the web. The aim was to maintain zero inventories, ensure high delivery speeds and achieve maximum reach.
     Where, then, does domestic air cargo come in?
     Those in the express logistics sector do not use air cargo for e-commerce deliveries.
     While DHL can bank on Blue Dart to send out last mile deliveries, Monteiro notes “strong capabilities in value added last mile deliveries in India.”
     Elsewhere, DTDC, a leading domestic courier and express logistics company, still believes in surface transport reasoning that the aforementioned infrastructure remains inadequate for deliveries by air.
     Ramesh Mamidala, CEO, Celebi Delhi Cargo Terminal Management India, thinks somewhat the opposite, noting that a large percentage of India’s domestic air cargo is driven by e-commerce.
     Elsewhere Delhi airport has been able to ramp up the infrastructure to handle the high volumes but it is still grappling with growth.
     At Delhi, work continues on creating the domestic cargo terminal, which is expected to handle 550 tons cargo a day of automated air cargo.

India Post Gets Shot In The Arm

     India Post, which had—just a few years ago—almost become defunct, has resurrected itself piggybacking with e-commerce.
     With the widest reach in the country, today Amazon along with a few other e-commerce portals are utilizing India Post.
Tirthankar Ghosh