Port Economy to Drive India’s Growth

Syllabus: GS3/ Economy

Context

• PM Modi said that Coastal States and port cities will become key growth centres for a developed India, during the commissioning of the Vizhinjam International Seaport in Kerala.

What is the Port Economy?

• The port economy refers to the economic activities and value generated through the functioning and development of ports, which serve as vital nodes in global trade and logistics networks.
• Ports facilitate the movement of goods and people, enable export-import operations, and support shipbuilding and repair.

History of India’s Port Economy

• In ancient India, ports like Lothal (Gujarat), Muziris (Kerala), and Arikamedu (Tamil Nadu) served as vibrant centers of Indo-Roman, Indo-Greek, and Southeast Asian trade.
• During the medieval period, ports like Surat, Calicut, and Masulipatnam emerged as key hubs for trade with Arabs, Persians, Chinese, and Europeans.
• However, with the advent of colonialism the focus turned toward resource extraction, rather than national development.

Status of port development in India

• India has a vast coastline with 13 major ports and over 200 non-major ports. Together, they handle around 95% of India’s foreign trade by volume and 70% by value.
• As of 2024–25, India ranks among the top 20 countries in global shipbuilding.
• Two Indian ports, Jawaharlal Nehru Port Authority (JNPA) and Mundra Port, are among the top 30 globally.
• As per the World Bank’s Logistics Performance Index (LPI), 2023 India moved up to 22nd Rank in the Global Ranking in International Shipments category and the overall 38th Rank in Logistics Performance Index score.
• The Vizhinjam Seaport is India’s first dedicated transshipment port, aimed at reducing dependence on foreign ports as 75% of India’s transshipment occurs abroad currently.
• A shipbuilding and repair cluster is being developed in Kochi under the Sagarmala initiative.

Benefits of a Robust Port Economy

• Geostrategic Value: Ports enhance India’s maritime influence and support initiatives like SAGAR (Security and Growth for All in the Region) and Project Mausam.
• Regional Development: Port-led industrial zones catalyze infrastructure growth and attract private investment in hinterland regions.
• Environmental Efficiency: Well-managed ports reduce carbon emissions by improving turnaround times and facilitating modal shift to railways/inland waterways.
  • Turnaround time is the time a ship spends at port from arrival to departure.
  • Inland Water Transport (IWT) emits 50% less CO₂ per tonne-km than road transport.
• Employment Generation: Ports directly and indirectly support millions of jobs in logistics, warehousing, and ancillary sectors.

Challenges

• High Logistics Costs: India’s logistics cost is about 13-14% of GDP, compared to 8-9% in developed economies.
• Dependency on Foreign Ports: Major transshipment activities rely on Colombo, Singapore, and Port Klang due to lack of domestic deepwater capacity.
• Port Congestion, procedural inefficiencies and lack of digitization lead to delays, reducing global competitiveness.
• Environmental Concerns: Port construction and dredging damage coastal ecosystems and marine biodiversity.

Government Initiatives

• Sagarmala Programme: It aims to reduce logistics costs by port modernization, port-led industrialization, and improved hinterland connectivity.
• The Maritime India Vision 2030 aims to enhance India’s maritime capabilities with a targeted investment of ₹3 lakh crore, aiming to boost cargo handling capacity to over 2,500 million metric tonnes.
• National Logistics Portal (Marine) is being developed as a one stop digital platform where all maritime stakeholders are being integrated for easier and speedier services.
• Establishment of the ₹25,000 crore Maritime Development Fund (MDF): The fund aims to support long-term investments in the sector, with the government contributing 49% and the remaining 51% mobilised from ports and private sector investments.
• PM Gati Shakti Plan integrates infrastructure planning across sectors to improve multi-modal logistics efficiency.

Way Ahead

• Develop Green Ports: Invest in shore power, LNG bunkering, and sustainable dredging to minimize environmental impact.
• Private Sector Participation: Public-Private Partnerships (PPP) can expedite infrastructure upgrades and improve service quality.
• Leverage Strategic Geography: India should maximize its location near major global trade routes to become a global transshipment and logistics hub.

Source: TH