Monday, January 04, 2016

Is the Indian aviation industry finally airborne?

The aviation industry in India has evolved significantly over the last couple of decades. Industry reports indicate that the Indian aviation sector is presently ranked among the top ten aviation markets in the world. The reports further suggest that the Indian aviation industry is on a high growth trajectory and could be at the top position in the foreseeable future.
Placed perfectly between the western and the eastern hemisphere, India has the opportunity to take advantage of its geographical location to become the hub of the global aviation industry. Other factors such as large scale collaborations between international and domestic airlines, emergence of world class airports and liberal Foreign Direct Investment (FDI) norms are also playing a vital role in pitching India as an upcoming leader in the global aviation sector.
However, despite the presence of such driving forces the Indian aviation industry has not tasted its due share of success yet. Exceptions apart, a majority of the players in the passenger transport industry are understood to be incurring significant losses.  Other commercial operations in the aviation space such as cargo transport, ‘maintenance, repair and overhaul’ (MRO) and the aircraft manufacturing industry are still at a nascent stage. For instance, the draft National Civil Aviation Policy 2015 indicates that the present spend by domestic carriers on the MRO of their fleet is approximately Rs 5,000 crore with a majority of such spending being done in countries like Sri Lanka, Malaysia and UAE due to lack of adequate infrastructure in India.
It would not be an overstatement to say that the cascading and multi-tiered system of applicable indirect taxes in India copiously contributes to derailing the aviation industry off its high-growth path. Despite the efforts made by the central government, various factors under indirect taxes continue to obstruct the growth of the aviation sector and are yet to be rectified.
04/01/16 Forbes India
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