Domestic road transportation sector to grow by 10-12% in FY 2022: ICRA

On account of the nationwide lockdown, the Indian logistics sector has witnessed a significant sequential recovery after experiencing severe disruption in Q1 FY2021. This had created demand-side and supply-side challenges which eased in subsequent months as economic activity recovered. As per ICRA note, as lockdown-related restrictions eased and economic activity revived, the freight availability for logistics players also improved. Accordingly, many of the logistics companies reverted to pre-pandemic levels by end of Q2 FY2021 and started reporting Y-o-Y growth from Q3 FY2021, the same has continued into Q4 FY2021 as well. Freight rates also remained firm during this period.
According to Rohan Kanwar Gupta, Assistant Vice President & Sector Head, ICRA Ratings, “As the economy opened up and industrial, manufacturing, construction and consumption activities picked up pace, freight availability also improved, aiding recovery in the sector. Freight rates also held up in this period. As such, the pace of revenue contraction mellowed down significantly in Q2 FY2021, and reverted to growth trajectory in Q3 FY2021. This trend was also visible in E-way bill volumes, which reached pre-pandemic levels in September 2020 and posted Y-o-Y growth in all subsequent months. While freight volumes in Q3 FY2021 were supported by the historically strong festive period, the sector sustained its volume growth even after the season ended, giving comfort regarding the sustainability of the recovery.”
The recovery has also been visible across other modes of transportation as well. The rail freight traffic reported similar trends, reporting Y-o-Y growth of 5% and 10% in Q2 FY2021 and Q3 FY2021 respectively. The volumes thereafter have also held up, touching peak freight volumes in January 2021, resulting in 7% Y-o-Y growth during the fourth quarter so far. The seaways freight traffic, though growing slower than the other modes on account of supply-side/infrastructure constraints, has nevertheless, also reverted to growth trajectory from November 2020 onwards.