India is the ninth largest aviation market in the world, according to RNCOS research report, titled "Indian Aerospace Industry Analysis". It is anticipated that the civil aviation market will register more than 16 per cent compound annual growth rate (CAGR) during 2010-2013 on back of strong market fundamentals.
The rapidly expanding aviation sector in India handles about 2.5 billion passengers across the world in a year; moves 45 million tonnes (MT) of cargo through 920 airlines, using 4,200 airports and deploying 27,000 aircraft. Currently, 87 foreign airlines fly to and from India and five Indian carriers fly to and fro from 40 countries. India is expected to be amongst the top five nations in the world in the next 10 years. An efficient civil aviation sector is important for India as it is inter-linked with other sectors in the economy and generates income and employment through global commerce and tourism, as per a National Council of Applied Economic Research (NCAER) study titled 'Emirates in India - Assessment of Economic Impact and Regional Benefits'.
Airport infrastructure in India is witnessing improvisation and expansion on a massive scale, with the Government avidly supporting private participants. The need for airport infrastructure in India has increased considerably. In order to ramp up airport infrastructure, the Government has unveiled reforms to facilitate investment in this segment. The investment in Indian airport infrastructure market, especially in the greenfield projects is expected to increase.
The domestic airlines carried 438.4 million passengers during January -September 2012 (first three quarters of calendar year), according to data released by the Directorate General Civil Aviation (DGCA).
The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 446 million from April 2000 to September 2012, as per data released by Department of Industrial Policy and Promotion (DIPP).
Recent Developments
- India released its first ever detailed Aviation Carbon Footprint Report for 2011, on October 9, 2012, which states that carbon dioxide (CO2) emissions from Indian scheduled airline operations as well as from foreign airlines to international destinations represent less than one per cent of the country's total CO2 emissions, which is significantly lower than the global average contribution of airlines
- A 10-member delegation led by Mr S R Rao, Commerce Secretary, Ministry of Commerce and Industry, the Government of India, will visit Pakistan for two days. The visit aims at boosting trade relations, increasing air connectivity and starting trade in petroleum products. Two-way trade between India and Pakistan is estimated to increase to US$ 6 billion by 2013-14
Government Initiatives
In a major step aimed to boost the Indian civil aviation sector, the Cabinet Committee of Economic Affairs (CCEA) has relaxed the FDI norms in aviation, which will allow foreign aviation companies to invest in Indian aviation companies. The foreign carriers can now pick up to 49 per cent stake in domestic Indian aviation firms.
The 12th Five Year Plan (2012-17) estimates the domestic and international cargo to grow at the rate of 12 per cent and 10 per cent, respectively, with the total traffic projected to touch 5.9 million tonnes (MT) by 2020. The Government has planned to invest US$ 30 billion in next 10 years," according to Mr S N A Zaidi, Secretary, Civil Aviation.
The Government's open sky policy has attracted many foreign players to enter the market and the industry is growing in terms of number of players and the aircrafts. Given the strong market fundamentals, the civil aviation market in India is expected to register a CAGR of more than 16 per cent during 2010-2013, as per a RNCOS report.
The Government has taken various steps towards structural policy reforms and has come out with new policies which are liberal and will encourage public-private partnerships (PPP).
- The Government of India allows 100 per cent foreign direct investment (FDI) for green field airports, via the automatic route. Moreover, foreign investment up to 74 per cent is permissible through direct approvals while special permissions are required for 100 per cent investment
- Private investors are allowed to set up general airports and captive airstrips while maintaining a distance of 150 kilometres (kms) from the existing ones. Complete tax exemption is also granted for 10 years
- About 49 per cent FDI is allowed for investment in domestic scheduled passenger airlines and investment up to 100 per cent by non-resident Indians (NRI) via the automatic route. FDI up to 74 per cent is allowed for non-scheduled and cargo airlines
Road Ahead
The Indian aviation industry is exploring opportunities to improve connectivity and is also looking at enhancing the number of Indian carriers to various countries. Rise in per capita income is making air travel more affordable for Indian travellers, as per RNCOS' research report "India Airports Market Assessment". It is anticipated that by FY 2015, Indian airports (including domestic and international) will handle close to 256 million passengers. India's fast growing tourism industry has added impetus to the market and has also improvised on airport industry's positive future outlook.
"A significant potential lies for the Indian airports to become transhipment hubs," as per a KPMG report. Buoyed by the success of implementation of public-private partnership (PPP) model in airport development, the Government of India plans to invest more on expansion of existing airports, by means of modernisation.
Exchange Rate Used: INR 1: US$ 0.01823 as on December 18, 2012
References: Directorate General of Civil Aviation (DGCA), Press Releases, Media Reports, Outlook report by Centre for Asia Pacific Aviation, Ministry of Civil Aviation