Indian aviation industry on the cusp of unprecedented growth: Economic Survey

New Delhi: The Indian aviation industry is on the cusp of unprecedented growth, with a total order book of more than 1,500 aircraft across airlines and a projected demand for over 2,200 aircraft by 2042, the Economic Survey 2023-24 said on Monday.

The civil aviation sector in India has tremendous potential, driven by rising demand, increased economic activity, tourism, higher disposable incomes, favourable demographics, and greater penetration of aviation infrastructure, the survey noted.

Finance minister Nirmala Sitharaman tabled the Economic Survey and its statistical appendix in the Lok Sabha. This annual document, prepared by the Department of Economic Affairs, assesses the state of the economy and outlines short-to-medium-term prospects, and is released ahead of the Union budget.

India is projected to be the world's third-largest economy by 2027, needing hundreds of aircraft and scores of airports as millions of new passengers take to the skies.

The survey highlighted that the aviation sector experienced a significant credit inflow growth of 56% year-on-year, attributed to increased aircraft leasing, hiring and a positive medium- to long-term growth outlook. It said that credit to the services sector flowed across sub-sectors like transport operators, tourism, hotels and restaurants, aviation, professional services, trade, and commercial real estate.

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The survey also pointed to the potential in aircraft leasing industry in India, with the International Financial Services Centre (IFSC) at GIFT City, as most aircraft currently operated by Indian airlines are leased from offshore lessors that have access to competitive capital costs.

Aviation Growth

While so far more than 28 aircraft lessors have already registered at GIFT City and have leased more than 20 aircraft and 49 aircraft engines, the potential for the industry is huge. Recently, the Tata Group-backed Air India also commenced leasing of its wide-body aircraft from the IFSC zone.

“The future of aviation services in India is anchored in the growth of the Maintenance, Repair, and Operations sector and the burgeoning drone industry. India aims to become a global drone hub by 2030, supported by liberalised regulations and incentives,” the survey said.

The survey, which said that the Indian economy expanded by 8.2% in FY24 and expects a 6.5%-7% growth in current fiscal year, also pointed out that a large proportion of Indian international traffic for the long haul goes through connectivity hubs in the Middle East and Southeast Asia and hence, there is also a need to provide adequate long-haul connectivity from India by strengthening Indian airlines.

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As per data from the Directorate General of Civil Aviation, the domestic traffic for India has increased by over 125% since 2014 to 152 million passengers in 2023. It was 67.4 million passengers in 2014. Similarly, international passengers at Indian airports have risen by nearly 49% since 2013-14 to 6.1 million passengers in 2023-24, from 4.1 million passengers in 2013-14, data from Airports Authority of India showed.