India has emerged as the world's fastest-growing aviation market, fuelled by soaring demand and unwavering support from the government. The Ministry of Civil Aviation (MoCA) has targeted to double the domestic air passenger traffic from the existing 15 crore to 30 crore by 2030. For this, the government has to build more than 100 airports in the next six years. In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman announced the construction of fifty additional airports, heliports, etc to improve regional air connectivity.
In the last few months, the Ministry of Civil Aviation (MoCA) witnessed a record surge in passenger traffic on domestic as well as international routes. To address the increasing footfall, the government has undertaken several steps such as the construction of new airports, development of new terminals, the introduction of new flights, launching of air connectivity schemes, among others.
For April-December period of FY2024, domestic passenger traffic grew 16.6% to 2,282.30 lakh while international passenger traffic grew to 24.3% to 510.50 lakh, thus, total passenger traffic inclining 18% to 2,792.80 lakh passengers. It is expected that the passenger traffic will grow at a CAGR of 14% for the period of FY 23-25. An aspirational and affluent middle and upper middle class in tier-2 and tier-3 cities is taking to the skies more often than ever. Now, as the country's Gross Domestic Product (GDP) is poised to grow at 6.5-7%, an increased disposable income will enable more Indian consumers to take the aerial route for their travels.
Budget Expectations:
To support the sector in broad manner via sustained focus on infrastructure initiatives.
- To increase the budget allocation for training institutes, bridge the gap between supply and demand, and accelerate in privatization of 13 airports, among others.
- To provide tax relief on ATF to bridge the viability of airlines
- To provide fiscal incentives for R&D and manufacturing of MRO items in India under the Make in India campaign
- More capital allocation to AAI for developing infrastructure at the underserved airports (so that all potential routes can be operationalized)
- To extend the PLI scheme to additional industries, especially labor-intensive manufacturing sectors, which would have a significantly larger multiplier effect on the Indian economy?
Outlook:
Long term outlook is very upbeat for the sector. Domestic air passenger traffic rose 8.4% over a year to 137.99 lakh passengers in December 2023, according to the data published by Directorate General of Civil Aviation (DGCA). The passenger traffic of scheduled domestic airlines grew 8.3% sequentially in December 2023. The cumulative domestic air passenger traffic for the first nine months of FY2024 (April-December 2023) reached a total of 1,145.33 lakh, representing a 15% from corresponding previous period. Domestic air traffic rose around 61% year-on-year 1370.90 lakh passengers during in FY2023. Domestic airlines passenger traffic grew 49% to 852.34 lakhs in FY2022 as compared to fall of 62.2% to 571.10 lakh in FY2021.
India is currently the 7th largest civil aviation market in the world and is expected to become the third-largest civil aviation market within the next 10 years. To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. As of November 2023, India had 148 operational airports. India has envisaged increasing the number of operational airports to 220 by 2025.
In the Union Budget 2023-24, the Government has allocated Rs 3,224.67 crores (US$ 440.36 million) to the Ministry of Civil Aviation.