The Industry of Aviation in India is amongst the fastest growing globally. It has shown a growth rate of 18% per annum. The open policies of the government have led many foreign players to take interest in this sector. In fact, the private participation constitutes about 75% of this sector. India is thus fast becoming a major player in the global aviation market.
A few factors that have propelled the growth of this sector are: increased purchasing power, lower airfares due to the advent of low-cost carriers, emergence of India as a tourist country, more outbound travel, and the economic progress.
The entry of low-cost carriers pioneered by Air Deccan helped greatly reduce the costs involved in flying. This helped attract consumers for whom air travel was only a dream. Now a number of low-cost airlines are operating in India, namely Go Airways, Spice Jet, and Kingfisher Air, and they have a major share of the Indian aviation industry.
Thus, domestic participation in this industry in India is projected to grow by 25-30% and internationally by 15%, increasing the potential customers by about 100 million in 2010. Also, by 2020 the cargo section is projected to rise to approximately three million tonnes.
Besides these factors, the initiatives by the government are a further boost to this industry. Its plans to modernize the infrastructure and develop more international airstrips are also proving to be an impetus to this industry. New airports are to be built to handle more traffic and ease the pressure on the existing airfields. Modernization of airstrips in metropolises is also being planned. All these initiatives are through public-private partnerships.
Aviation Policy in India
The policies of the Indian government encourage foreign participation.
Government allows 100% FDI via the automatic route for the green field airports. Also, foreign investment up to 74% is permissible through direct approvals while special permissions are required for 100% investment.
Private investors are allowed to establish general airports and captive airstrips while keeping a distance of 150 km from the existing ones. Complete tax exemption is also granted for 10 years.
About 49% FDI is allowed for investment in domestic airlines via the automatic route. However, this option is not available for foreign airline corporations. Complete equity ownership is granted to NRIs (Non Resident Indians). Foreign direct investment up to 74% is allowed for non-scheduled and cargo airlines.
Thus, all these policies promote foreign investment in this industry.
The Indian aviation industry is forecasted to grow phenomenally in the coming years. The Vision 2020 announced by the Civil Aviation Ministry conceives of building infrastructure to support 280 million customers.
Investments to the extent of US$ 110 billion are envisaged by 2020. About US$ 30 billion for development and sprucing up of existing airports and US$ 80 billion for building new fleets is being estimated. The aerospace giant Boeing projects that the Indian aviation industry will require about 1,000 commercial jets in the coming 20 years.
Related areas like repairs, maintenance, and training also provide good investment potential.
Thus, overall it is a very promising sector and a potent investment area.