The Indian aviation sector is truly taking off—with an unprecedented 18% annual passenger traffic growth over the last three years, the industry is on the cusp of breakthrough growth. At a market size of $16 billion today, the Indian aviation industry could be the third largest in the world by 2020. Every year, as many as 20-25 million Indians are experiencing air travel for the first time.
Favourable government policies, including the unveiling of the National Civil Aviation Policy (NCAP) 2016, will continue to provide further growth stimulus. Considering China and the US already have 700 million and more than 1.5 billion airport footfalls, respectively, it seems only an eventuality that India’s current airport passenger traffic of 220 million will exceed 1 billion by 2030. NCAP recognises this potential and has set a target of 1.4 billion annual passenger capacity by 2027 (0.25 billion currently). This will mean building five times more airport capacity in 10 years—a challenging feat to say the least.
Accelerated development of airport infrastructure, both new and existing, is the need of the hour, to ensure adequate capacity to manage the burgeoning passenger growth. This will also create significant ripple effects in the economy, as airports have one of the highest economic multipliers across infrastructure asset classes. There is a potential to create 25-30 million direct and allied sector jobs, while catalysing faster growth in allied sectors such as construction, retail, trade, logistics, hospitality and tourism.
Accelerated airport development: PPP is imperative
Building airport capacity for 1.4 billion annual passengers is estimated to require funds in excess of $30 billion. Funding this completely through the public exchequer may not be judicious, given multiple other equally important socio-economic priorities of the government. Also, the Airport Authority of India’s ability to undertake and execute this large-scale development within such a short time-frame is also likely to be a constraint. It is, hence, inevitable that private sector participation will be require to fund, construct and manage some of this enhanced airport capacity. Read more