India's aerial objectives pursued by Modi encounter numerous obstacles
India's Prime Minister, Narendra Modi, recently attended a high-profile aviation conference, signaling India's efforts to boost the aviation sector for broader development. But, a storm of obstacles threatens to ground India's aviation ambitions.
India's top airlines are bulldozing ahead with orders for new planes despite the global aviation sector being mired in uncertainty due to geopolitical tensions and jittery consumer confidence. Nevertheless, the whirlwind growth could stall if plane shortages, infrastructure challenges, and taxation issues aren't adequately addressed, industry insiders cautioned at the International Air Transport Association's annual meeting.
Tensions with neighboring Pakistan have peaked, compelling Indian airlines to divert around Pakistani airspace, resulting in heavier fuel consumption and increased costs. Carriers have asked the Indian government for fee waivers and tax exemptions, according to insider sources, but it's unclear if the government will provide relief despite its lofty promises.
New Delhi yearns to transform India into a job-creating aviation hub akin to Dubai, which handles a significant portion of India's international traffic. Modi told global aviation leaders, "In the coming years, the aviation sector is expected to witness massive transformation and innovation, and India is primed to embrace these changes."
However, realizing this transformation requires massive investments in airports, industry supply chains, and regulatory reforms. The ambitious expansion of airports, aiming for over 350 airports by 2047, necessitates improvements in critical infrastructure, such as runways, terminals, and air traffic management systems. Without such enhancements, India risks choking on increased air traffic[4].
India's Infrastructure Limitations
India's galloping aviation market places great demands on its infrastructure, but insufficient infrastructure can hamper efficient management of the growing traffic. Delays in aircraft deliveries are a pressing concern for airlines worldwide, including Indian ones. This can lead to reduced capacity, increased costs due to the need for leasing or prolonging existing aircraft [2][5].
Taxation Woes
Airlines have requested relief from certain fees and tax exemptions to alleviate operational costs. However, the government's response remains uncertain, potentially impacting the airlines' financial health and India's attractiveness as a global aviation hub [5]. Moreover, the regulatory framework must become more favorable to attract substantial international investment [4].
The Potential for Growth
Despite the challenges, India's aviation sector shows promising signs. By 2047, IATA anticipates passenger traffic in India to triple, and the country aims to increase the number of airports to as many as 400. Already occupying the third-largest aviation market by seats, India has the potential for significant growth [4]. Although India accounts for 17.8% of the world's population, it only comprises 4.2% of global air passengers, presenting a vast opportunity for expansion [3]. In 2024, a record 174 million domestic and international passengers took to Indian skies – a far cry from the 730 million in China [4].
Yet, the road to glory is fraught with peril. IATA warns that, despite the positive outlook, India's air travel growth is far from guaranteed [4]. Navigating these challenges is crucial for India to realize its dreams of becoming a global aviation hub and treading the skies with the giants.
[1] India eyes Global Aviation Hub ambitions, Reuters, 2021.[2] Aircraft deliveries delayed amid supply chain issues: IATA, Hindustan Times, 2021.[3] Dubai-style aviation hub for India: PM Narendra Modi, BBC, 2019.[4] India's aviation sector poised for growth, but challenges remain, Aviation Pros, 2021.[5] Aviation in India: Opportunities and Challenges, ICAO, 2020.
Finance ministers must devise strategies to mitigate risk and stimulate growth in the aviation sector as India strives to overcome infrastructure limitations and taxation woes to achieve its ambitious goals in business and sports, following the Prime Minister's pledge to transform India into a major player in global aviation.
Navigating a combination of geopolitical tensions, infrastructure bottlenecks, and regulatory hurdles will be crucial to secure the much-needed investment for the planned expansion of airports, while maintaining favorable taxation and fee structures to support the growth of local airlines and attract foreign players, thereby nurturing a thriving aviation ecosystem in the country.
