After the Indian aviation sector underwent liberalisation in late nineties, it has seen a flurry of private service airlines entering the industry. The aviation sector in India holds immense potential for growth; more so because it receives great impetus from the booming tourism industry driven by higher disposable incomes and favourable demographics.
Also, the robust policy regime created by the Indian Government acts as the blood-line of this industry. While the last five years have witnessed significant investments by large and small domestic companies, indigenous aerospace and defence industry has been evolving in a big way.
Recent developments and statistics pertaining to the sector are discussed hereafter.
Government Initiatives
The Government strives to streamline various policies to promote greater investment and make the Indian aviation industry an integral part of the global aerospace and defence supply chain. India's acquisition programme and its offset policy is anticipated to generate investments in excess of US$ 20 billion along with creating massive employment for skilled and professional manpower.
The government is also trying to create policies that will enable creation of micro, small and medium enterprises (MSME) clusters with quality infrastructure and building capabilities. There are around 500 MSMEs across different clusters in the aerospace sector, but the clusters are fragmented and yet to evolve.
Recently, the Foreign Investment Promotion Board (FIPB) has cleared Malaysian low-cost carrier (LCC) AirAsia's proposal to form a budget airline in a joint venture (JV) with the Tatas and Telstra Tradeplace at an initial outlay of Rs 80 crore (US$ 14.73 million). The proposal will head to the Directorate General of Civil Aviation (DGCA) for the necessary license after which the JV can commence its operations.
Once approved, AirAsia India will be the first real action after the government in 2012 allowed foreign airlines to invest in their Indian counterparts.
Meanwhile, India and the US will soon sign an information sharing agreement to strengthen aviation security in both the countries. The agreement, that is yet to be approved by the Cabinet, would cover a large spectrum of civil aviation security wherein Transportation Security Authority of the US would be sharing information in areas including individuals, systems, technology and equipments with India.
Henry Steingass, Regional Director for South and Southeast Asia of US Trade and Development Agency (USTDA), said that the Indian aviation sector continues to hold immense potential for growth. "India is the founding member of International Civil Aviation Organisation (ICAO) and like the US, plays a key role in implementing important aviation security provisions regionally and globally," he said.
Road Ahead
AK Antony, the Defence Minister, said that the Indian aviation sector is growing at the fastest pace and will evolve into a major hub for aerospace operations and outsourcing in the coming years.
Moreover, the Indian civil aviation sector has continued to witness high passenger growth (domestic traffic compounded annual growth rate [CAGR] is 17 per cent from 2009 to 2011), and if the trend sustains, it could be among the top three aviation markets in the world by 2020, according to 'Indian Aviation: Spreading its Wings'- a report prepared by PwC with an industry body. The report further states that a strong market growth rate coupled with infrastructure expansion will boost the sector in a big way.
Exchange Rate Used: INR 1 = US$ 0.01840 as on March 8, 2013
References: Media Reports, Press Releases, Press Information Bureau