India’s Aviation Boom

• 28 Mar 2025

For Prelims: UDAN, Digi Yatra, Foreign Direct Investment, Aviation Turbine Fuel, Sustainable Aviation Fuel, Directorate General of Civil Aviation, Airports Authority of India 

For Mains: Development of India's Aviation Industry, Challenges in India's Civil Aviation and Possible Reforms, Regional Connectivity and Inclusive Growth 

Source:HT 

Why in News? 

India is set to host the 81^st International Air Transport Association (IATA) Annual General Meeting and World Air Transport Summit in June 2025.  

• This event highlights India’s rapidly growing aviation sector, which is projected to become the third-largest aviation market in the world within this decade. 

What is the Landscape of India’s Aviation Sector? 

• Market Growth and Global Position: India is the 3rd-largest domestic aviation market after the USA and China. India now accounts for 69% of South Asia’s airline traffic. 
  • India is expected to become the 3rd-largest air passenger market (international and domestic) by 2030. 
  • The passenger traffic (international and domestic) during FY25 (till September 2024)  stood at 196.91 million. 
• Employment Generation: The aviation industry directly employs 369,700 people and contributes USD 5.6 billion in economic output. 
  • When tourism and related industries are included, aviation supports 7.7 million jobs and contributes USD 53.6 billion, which is 1.5% of India’s GDP. 
• Infrastructure: Operational airports increased from 74 in 2014 to 157 in 2024, with a target of 350-400 airports by 2047. Additionally, 21 greenfield airports were approved, with 11 already operational. 
  • Aircraft movement increased at a Compound annual growth rate (CAGR) of 3.85% from 2.05 million in FY17 to 2.67 million in FY24. 
  • New terminals and greenfield airports are under development (e.g., Bagdogra Civil Enclave, Dehradun terminal). 

What are the Key Drivers of India’s Aviation Growth? 

• Growing Middle Class: India’s growing middle class has doubled domestic air travel in a decade, reaching 37.6 crore in FY24 with 15% YoY growth. 
  • This demographic shift has led to increased demand for affordable and accessible air travel, especially on domestic routes. 
• Fleet Expansion: Airlines like IndiGo and Air India have placed massive aircraft orders. The number of operational commercial aircraft is expected to reach 1,100 by 2027, up from 771 (2023). 
• Tourism and Business Travel: The rise of religious, medical, and adventure tourism, coupled with growing business travel has boosted the overall growth of India’s aviation sector. 
• Talent Pool: India's 15% share of women pilots, compared to the global average of 5%, highlights significant progress in aviation gender equality. 
• Increasing Private Sector Participation: Public-Private Partnership (PPP) airports have grown from just 5 in 2014 to 24 in 2024. The National Monetization Pipeline includes privatisation of 25 airports. 
• Government Initiatives:  UDAN (Ude Desh Ka Aam Nagrik) has enhanced regional connectivity by subsidising airfares and developing under-served airports. 
  • Under UDAN over 519 routes have been operationalised improving accessibility to remote and interior regions across the country. 
  • Digi Yatra enables contactless, paperless air travel through facial recognition technology for seamless passenger processing. 
  • The government allows 100% Foreign Direct Investment (FDI) in scheduled domestic airlines (automatic route up to 49%), while Non-Resident Indians (NRIs) can invest 100% under the automatic route in Scheduled Air Transport Service. 
    • Between 2000 and 2024, India attracted USD 3.85 billion in FDI in the air transport sector. 
  • India implements a uniform 5% Integrated Goods and Services Tax on aircraft parts to boost the domestic Maintenance, Repair, and Overhaul (MRO) industry, which is projected to reach USD 4 billion by 2030. 

What Challenges Does Indian Aviation Face? 

• High Fuel Costs: Aviation is a low-margin industry with a global net profit margin of just 3.6%. Aviation Turbine Fuel (ATF) is heavily taxed in India, making up a significant portion of airline operating expenses and adding to the financial burden 
• Exchange Rate Volatility: The depreciation of the Indian rupee against the US dollar raises costs for airlines, as key expenses like aircraft leasing and fuel imports are dollar-denominated. 
• Sustainability: The global aviation industry is committed to achieving net zero carbon emissions by 2050.  
  • However, India's efforts are hindered by the slow adoption of Sustainable Aviation Fuel (SAF) and limited green airport infrastructure, impacting its progress in reducing emissions and environmental impact. 
• Skewed Regional Connectivity: Despite progress under the UDAN scheme, many Tier-II and Tier-III cities, especially in developing states like Telangana, remain under-connected. 
  • Airports like Kushinagar (Uttar Pradesh) and Sindhudurg (Maharashtra) struggle due to low demand, forcing airlines to cut operations. 
• Regulatory Complexity and Overlaps: Multiple agencies oversee aviation (Directorate General of Civil Aviation, Airports Authority of India, Ministry of Civil Aviation), leading to overlapping mandates and delayed clearances. 
  • Airlines face complex compliance burdens, including taxation, environmental clearance, and airport charges. 
• Underdeveloped Airspace Modernization: Rapid increase in aircraft has not been matched by modernisation of air traffic control and airspace optimisation, especially in busy sectors leading to flight routing and delays. 
  • Additionally, weak cargo infrastructure hampers freight growth despite rising demand. 

What Measures are Needed to Strengthen India's Aviation Growth? 

• Rationalisation of ATF Taxation: Bring ATF under the Goods and Services Tax (GST) regime to reduce cascading taxes and provide uniform pricing across states. 
• Airspace Modernisation: Expedite the proposed Civil Air Traffic Management System with Advanced-Surface Movement Guidance and Control System to optimize airspace usage and reduce delays. 
• Boost Sustainability:  India, the world's third-largest ethanol producer and consumer, has strong potential to lead in SAF production via the Alcohol-to-Jet (AtJ) pathway (conversion of alcohols to an alternative jet fuel). 
• Incentivising Cargo Infrastructure: Develop dedicated air cargo hubs under Krishi UDAN 2.0 with cold chain and warehousing for perishable and high-value goods to boost rural incomes and exports. 

Conclusion 

India’s aviation sector is at a historic turning point and is well-positioned to become a global aviation leader. By addressing cost concerns and promoting sustainability, India can ensure long-term success in this crucial industry. 

Drishti Mains Question:

What are the key factors driving the growth of India’s aviation sector? How does it contribute to the economy?

 

UPSC Civil Services Examination, Previous Year Questions (PYQs) 

Mains

Q. Examine the development of Airports in India through joint ventures under Public–Private Partnership (PPP) model. What are the challenges faced by the authorities in this regard? (2017)