BusinessWire India

New Delhi [India], January 19: The Centre for Digital Economy Policy Research (C-DEP), in collaboration with IIT Delhi, released its report titled "Study of Technology-Enabled Intra-City Logistics for MSMEs" at India Habitat Centre, New Delhi. The report assesses the role of tech-enabled goods transportation services in improving the logistics cost and efficiency for Micro, Small and Medium Enterprises (MSMEs).

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The report was released by the Shri Praveen Khandelwal, Member of Parliament and Secretary General of Confederation of All India Traders (CAIT) and Shri Ashwini Mahajan, Co-Convener of Swadeshi Jagran Manch.

MSMEs contribute to nearly 30% of India's GDP and 45% of industrial output, yet face persistent challenges in intra-city goods movement, including high transport costs, unreliable vehicle availability, and delays in transportation of goods. Based on interviews with MSMEs, tech-enabled goods transportation service providers, and analysis of aggregated data from these service providers, the study finds that technology-enabled goods transportation services have become a key enabler of day-to-day business operations for small businesses.

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Speaking at the report release, the honourable Chief Guest, Shri Praveen Khandelwal, said, "The key to India becoming a developed nation depends on lowering logistics costs for our MSME's." He mentioned that "A significant part of logistics costs in India can be attributed to road transport. If India is to bring logistics costs down to 4-5% of GDP, improving cost efficiency in road-based and intra-city logistics will be key."

Shri Ashwini Mahajan, Co-Convener of Swadeshi Jagran Manch, said, "MSMEs have always been the backbone of our economy, and today with intervention of technology, they have proven their mettle - from developing anti-drone systems to strengthening our defence sector, things we couldn't imagine years ago. India's tech ecosystem, exemplified by UPI and our space capabilities, has grown so strong that other nations now seek to collaborate with us. India as a country has immense potential to lead, and our rising global ranking signifies the same."

Speaking at the report release, Dr. Jaijit Bhattacharya, President of the Centre for Digital Economy Policy Research (C-DEP), observed that, "A significant share of logistics costs within road transport arises from intra-city goods movement. Technology-enabled goods transportation services are delivering tangible benefits for MSMEs by reducing intra-city logistics costs. Beyond cost savings, these services improve operational reliability and time efficiency, creating scope for higher MSME earnings and measurable gains in labour productivity. If higher taxes make these services unaffordable, MSMEs lose a tool that improves efficiency and customer trust. Better clarity would ensure that technology adoption is not penalised."

Key findings show that business users account for approximately 71% of users on tech-enabled goods transportation services, while contributing nearly 97% of all intra-city goods transportation orders across two-wheeler, three-wheeler and four-wheeler vehicle categories. Among surveyed MSMEs, 73% reported lower transportation costs, 95% experienced improved on-time transportation of goods, and nearly 27% expanded their customer reach due to access to on-demand logistics. Faster vehicle availability and access to right-sized vehicles enable MSMEs to complete more order per day, reduce coordination time, and manage priority consignments without investing in owned fleets.

The study also highlights emerging policy and regulatory risks that could undermine these efficiency gains. In particular, GST 2.0 risks misclassifying digitally booked goods transport services as "Local Delivery Services," potentially increasing the tax burden from 5% to 18% for many MSMEs. Such an increase could raise per-trip logistics costs by over 12%, disproportionately affecting small businesses operating on thin margins. The report cautions that higher costs may push small businesses back towards informal, cash-based transport options, reversing progress on formalisation, transparency, and service reliability.

Speaking at the report release, Professor P. Vigneswara Ilavarasan, Department of Management Studies, IIT Delhi, noted, "MSMEs are greatly benefited by the tech-enabled goods transportation services by increasing their market reach, enhancing operational efficiency and helping achieve significant cost savings thereby contributing to sustainable growth. The extant regulatory environment should be an enabler to amplify the benefits."

The report also draws attention to broader ecosystem transition considerations. Small independent transporters face significant barriers in moving toward formalisation, including navigating compliance processes, documentation requirements, and access to digital infrastructure. In parallel, state government initiatives to encourage fleet electrification, particularly in higher-payload freight segments, represent an important step toward sustainable mobility. As this transition progresses, continued alignment with electric vehicles availability and charging infrastructure expansion will help ensure that logistics services remain affordable for MSMEs during the transition phase.

To address these challenges, the report recommends clear regulatory clarification under GST, promotion of gradual formalisation of informal transport operators through digital public infrastructure, and targeted PLI based support to enable an orderly transition to electric freight vehicles without raising logistics costs for MSMEs.

Please refer to the link below to access the complete report.

https://c-dep.org/reports/detail/?id=qvxib20kqhq4g7tifd8lgnne

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