Digital Logistics Game-Changer for MSMEs
Digital Desk, New Delhi. Center for Digital Economy Policy Research (C-DEP) in collaboration with IIT Delhi today released its report titled “Study of Technology-Enabled Intra-City Logistics for MSMEs”. This report assesses the role of technology-based freight transportation services in improving logistics spend and efficiency for micro, small and medium enterprises (MSMEs).
The report was released by Praveen Khandelwal, Member of Parliament and general secretary of the Confederation of All India Traders (CAIT), and Ashwini Mahajan, co-convenor of Swadeshi Jagran Manch.
MSMEs contribute about 30 per cent to India's GDP and 45 per cent to industrial output, yet they face persistent challenges such as high transportation costs, non-availability of vehicles and delays in shipping goods within the city. Based on interviews and data analysis of MSMEs and tech-based transportation service providers, the study finds that these digital services have now become a key tool for the daily functioning of small businesses.
Releasing the report, chief guest Praveen Khandelwal said, "India's potential to become a developed nation depends on reducing logistics costs for our MSMEs." He noted that "A significant portion of logistics costs in India are linked to road transport. If India is to bring down logistics costs to 4-5 per cent of gross domestic product (GDP), it will be important to improve cost efficiency in road-based and intracity logistics."
Ashwini Mahajan, co-convenor, Swadeshi Jagran Manch, said, “MSMEs have always been the backbone of our economy, and today with the intervention of technology, they have proved their mettle, from developing anti-drone systems to strengthening our defense sector, things that we could not even imagine years ago. India's tech ecosystem, exemplified by UPI and our space capabilities, has become so strong that other countries now want to collaborate with us. India as a country is taking the lead. has immense potential, and our rising global ranking reflects this."
Releasing the report, Dr Jaijit Bhattacharya, Chairman, Center for Digital Economy Policy Research (C-DEP) said, “A significant portion of logistics costs within road transport comes from intra-city freight movement. Technology-based freight transportation services are delivering tangible benefits to MSMEs by reducing intra-city logistics costs. In addition to cost savings, these services improve operational reliability and time efficiency, thereby increasing MSME earnings and driving measurable gains in labor productivity. There is scope. If higher taxes make these services expensive, MSMEs will lose an important tool to increase efficiency and customer confidence. Better clarity will ensure that technology adoption is not penalized."
Key findings show that, there are approximately 71 per cent business users on technology-based freight transportation services, which contribute around 97 per cent of the total intra-city freight transportation orders across two-wheeler, three-wheeler and four-wheeler categories. Of the MSMEs surveyed, 73 percent reported lower transportation costs, 95 percent experienced improvement in on-time transportation of goods, and about 27 percent expanded their customer reach due to access to on-demand logistics. Faster availability of vehicles and access to right-sized vehicles enables MSMEs to fulfill more orders per day, reduce coordination time and manage priority consignments without investing in their own fleet.
The study also highlights emerging policy and regulatory risks that could undermine these benefits. In particular, there is a risk of digitally booked goods transportation services being misclassified as “Local Delivery Services” under GST 2.0. This may increase the tax burden for many MSMEs from 5 percent to 18 percent, increasing logistics expenses per trip by more than 12 percent. The report cautions that for small businesses operating on thin margins, this increased expense could push them back towards informal and cash-based options, hampering progress on formalization and transparency.
Releasing the report, Professor P. Vigneshwar Ilavarasan, Department of Management Studies, IIT Delhi, said: "Technology-based freight transportation services have brought significant benefits to MSMEs. This has enhanced their market presence, improved efficiency and led to significant cost savings, contributing to their sustainable growth. The current rules and regulatory environment should further enhance these benefits."
The report also draws attention to broader ecosystem changes. Small independent transporters face hurdles such as compliance processes and documentation in moving towards formalization. Parallelly, the State Government's initiative to encourage fleet electrification in heavy freight segments is an important step towards sustainable mobility. The report suggests that as this transition progresses, it will be necessary to keep pace with the availability of electric vehicles and the expansion of charging infrastructure, so that logistics services remain affordable for MSMEs during the transition.
To address these challenges, the report recommends clear regulatory clarifications under GST, promoting gradual formalization of informal transport operators through digital public infrastructure, and PLI-based support for the transition to electric vehicles without increasing logistics expenses.
Scan the QR code below to read the full report.
The Center for Digital Economy Policy Research (C-DEP) is an independent thought and policy research institute committed to advancing India's digital and technology-enabled economy.
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