[dropcap]T[/dropcap]he NDA government released the country’s civil aviation policy on 17 June. This has been hanging fire for two decades despite an equally long struggle to build infrastructure. Now it is time to prepare for a forecast 20% annual traffic growth until 2020. Within three days of the announcement, the Narendra Modi government also liberalized the restrictive foreign direct investment regime radically by opening 10 sectors, including defence and aviation.
That transport is a major driver of the economy needs no elaboration. It was the steam engine and railways that brought in the Industrial Revolution, first in England and then slowly to the rest of the world. The radiance of railway has faded in today’s globalized world, more so for a continent-size economy like India’s. For fast movement, be it for commerce or tourism, the choice mode of transport is civil aviation.
And the impact of civil aviation on a nation’s economic activity is well recognized. The ICAO estimated that $100 spent on air transport produce benefits worth $325 for the economy and 100 additional jobs in air transport result in 610 new economy-wide jobs. An efficient aviation sector is essential to support tourism, an industry with immense employment opportunity. The last estimate of the Tourism Satellite Account for India concluded that in 2012-13, 6.88% of India’s GDP was contributed by tourism. In terms of employment, 12.36% is contributed by the tourism sector. Given India’s huge reservoir of a semi-skilled young population, a service sector field like tourism is the main driver for employment generation.
The fast rate of economic growth in India since the beginning of the millennium saw the civil aviation sector growing at a faster pace and India now has emerged as the 9th largest civil aviation market in the world. Yet the growth did touch neither the entire paying class nor the geography. This is evident from the fact that contribution of tourism to GDP remained nearly stagnant at around 6.8%. In other words, tourism grew nearly at the same rate as the growth rate of GDP.
In order to break out from this low growth trap, the first national civil aviation policy adopted a two-pronged strategy. First, the government proposes to revive the 375 airstrips spread across the country. Currently, about 75 of the 450 airstrips/airports have scheduled operations. Many of these airports can be made operational with a small investment of between Rs 50-100 crore (US$ 7.5-15 million). This will encourage people in the hinterland to access air services, which they don’t due to the distance of nearest airports. This will also encourage more tourists, domestic and foreign, to visit interiors. The primary problem for a tourist is smooth and fast connectivity. Time, and not money, is the primary issue for a traveller.
Second, the Indian government has included the respective State governments as partners in the process. The States will identify and develop the airports’ financial cost of the subsidized for use. States will provide financial subsidies too in the form of providing supporting services including multi-modal hinterland connectivity. The increased economic activity due to higher footfall to the State will not only create immense economic benefits but will also more than compensate the resources spent on providing the supporting services.
Easing of rules and systems is a major positive signal in the civil aviation policy. Easing of code sharing arrangements, bilateral rights and provision of open sky policy with SAARC nations and destinations located beyond 5000 km radius from the national capital Delhi will help in boosting traffic. E-visa for passengers available to 150 nations and at 16 airports clubbed with the ease of travel due to the civil aviation policy will see a substantial increase in foreign tourist arrival from 8.03 million in 2015.
To facilitate air transport, the government created a Scheduled Commuter Operator category to provide connectivity on a regular basis on domestic routes. Such operators are permitted to carry out a domestic charter and to have a code share with other airlines, both domestic and international.
The government wants to create an eco-system to make flying affordable for the masses and to enable 300 million domestic ticketing by 2022 and 500 million by 2027, and international ticketing to 200 million by 2027. The civil aviation policy has set up the tone. Rest will depend on the speed of execution by different stakeholders like State governments, civil aviation operators and private participants.