India's logistics industry is expected to reach a market size of more than USD125 billion in 2010, according to Datamonitor's latest research.

The London-headquartered independent market analyst predicts double-digit growth rates for outsourced and contract logistics in India in its publication India Logistics Outlook 2007.

Research author Praveen Ojha said strong growth enablers existed in India in the form of more than USD300 billion of infrastructure investments, phased introduction of value-added tax (VAT) and development of organised retail and agri-processing industries.

"Also, strong foreign direct investment inflows in automotive, capital goods, electronics, retail and telecom [industries] will lead to increased market opportunities for third-party logistics (3PL) providers in India," she said.

Outsourced logistics, or 3PL, is outsourcing a company's logistics operations to a specialised firm that provides multi-tactical logistics services for customers, the report said.

Datamonitor said outsourced logistics, which made up "just above one-quarter of the entire USD90 billion Indian logistics market", were expected to grow at a compound annual growth rate of more than 16 per cent from 2007 to 2010.

Datamonitor said the Indian logistics industry was currently hampered by poor infrastructure, such as roads, communication and ports, and complex regulatory structures.

India's national highways are two per cent of the country's road network but handle more than 40 per cent of the national road freight traffic. The 12 major Indian ports handle volumes higher than their full capacity, resulting in pre-berthing delays and longer ship turn-around times, the report said.

The introduction of VAT is expected to replace a plethora of state and central government taxes, enhancing the logistics industry's efficiency.