Logistics Growth Shifts to Tier 2 and 3 Cities
India’s logistics and warehousing sector is experiencing rapid growth, with tier 2 and tier 3 cities emerging as key hubs in reshaping the nation’s supply chain landscape. Traditionally, major metropolitan cities like Delhi, Mumbai, and Bengaluru have dominated this sector, but now smaller cities are steadily becoming focal points for logistics operations.
This shift is expected to contribute significantly to India’s economic growth, with the domestic warehousing market projected to reach a value of US$35 billion by 2027, growing at a compound annual growth rate (CAGR) of 15 percent. A significant driver of this expansion is the surge in e-commerce, especially in non-metropolitan areas. As millions of consumers in smaller cities gain access to online shopping, the demand for efficient warehousing and logistics infrastructure is rising.
This is compounded by improved connectivity and the growing adoption of digital technologies in these regions. Government initiatives, such as the Urban Infrastructure Development Fund (UIDF), which allocates INR 100 billion annually to enhance infrastructure in tier 2 and tier 3 cities, are vital in supporting this development. Technological advancements are further fueling this growth. The adoption of automation, artificial intelligence (AI), and robotics in warehouses is enhancing operational efficiency and reducing costs.
AI-driven analytics, automated sorting, and packaging systems are transforming inventory management and warehouse operations. At the same time, India is increasingly embracing green logistics, integrating energy-efficient solutions, renewable energy sources, and eco-friendly packaging materials to minimize environmental impact. By 2027, India’s total warehouse space is expected to reach 1.2 billion square feet, with Grade A warehouses becoming the preferred choice due to their advanced infrastructure and strategic location.
This shift towards high-quality logistics facilities is set to strengthen regional supply chains, reduce transportation costs, and enhance economic development in smaller cities. As the logistics sector adapts to these changes, it is helping foster a more sustainable and resilient supply chain network across the country.
