Aviation
Introduction
The civil aviation sector in India has become one of the fastest-growing industries, playing a critical role in the country’s economic progress. Broadly, it is divided into scheduled air transport services (domestic and international airlines), non-scheduled services (charter and air taxi operators), and air cargo services (transportation of mail and freight). With IndiGo emerging as the largest airline by market share, India has positioned itself as the third-largest domestic aviation market globally.

Market Size and Growth
According to the International Air Transport Association (IATA), India is on track to overtake the U.S. and China to become the third-largest air passenger market by 2030. Aircraft numbers are also increasing steadily, projected to reach 1,100 planes by 2027.
Passenger traffic in FY25 stood at 411.76 million (domestic and international combined). Cargo traffic has also expanded at a CAGR of 2.8%, growing from 2.70 MMT in FY16 to 3.71 MMT in FY25. Domestic cargo accounted for 1,394 thousand tonnes in FY25, while international freight made up 2,325 thousand tonnes. Aircraft movements registered a CAGR of 3.85%, rising from 2.05 million in FY17 to 2.87 million in FY25.
International Aviation: Demand, Capacity, and Utilization
ICRA projects that Indian airport operators will register 18–20% YoY growth in FY26, buoyed by rising passenger traffic, tariff hikes, and higher non-aeronautical revenues. In FY24, domestic flight capacity (Available Seat Kilometers) rose to 162,289 million km, while demand (Revenue Passenger Kilometers) reached 148,251 million km.
Although passenger demand is strong, profitability remains constrained by high fixed costs, which slows down earnings recovery. This necessitates continuous investments in infrastructure to support sustained growth.
Key Investments and Developments
The aviation sector is attracting large-scale investments and innovative ventures:
- JSW Group announced a ?16,000 crore investment to boost infrastructure and enhance Durgapur airport.
- Sarala Aviation unveiled “Shunya,” a prototype air taxi designed for short trips, targeting a 2028 launch.
- Air Kerala plans to begin operations in June 2025.
- Air India Express launched a daily direct service between Delhi and Mangaluru, strengthening connectivity.
- Garuda Aerospace committed ?100 crore for a “Drone City” in Andhra Pradesh to foster innovation.
- Air India–Kenya Airways codeshare partnership broadened international travel options.
- The Cabinet Committee on Economic Affairs approved the ?1,549 crore development of a new civil enclave at Bagdogra Airport, designed to handle 10 million passengers annually.
- Magellan Aerospace and Aequs agreed to jointly establish an aircraft engine MRO facility in Karnataka.
- Adani Airports announced a US$ 7 billion expansion plan to bridge infrastructure gaps.
- Under the UDAN scheme, two water aerodromes were operationalized to improve regional connectivity.
- Foreign Direct Investment (FDI) inflows into the air transport sector (including freight) totaled ?37,074 crore (US$ 5.14 billion) between 2000 and 2024.
- Scheduled airline operators added 112 aircraft in 2023, bringing the total fleet size to 771 by year-end.
- Wings India 2024, Asia’s largest aviation expo, showcased India’s ambitions under the theme “Connecting India to the World in Amrit Kaal.”
- Planned investments include ?1 lakh crore (US$ 12 billion) in airports, with PPP airports expected to rise from 5 in 2014 to 24 in 2024.
- By 2025, India aims to add 220 new airports, expand cargo flights for perishable goods, and strengthen aviation navigation systems.
Additionally, several financial deals have supported airport infrastructure: Mumbai International Airport raised US$ 750 million in 2022, Adani Airport Holdings raised US$ 250 million, and AAI earmarked ?91,000 crore (US$ 12 billion) for capital expansion.
Government Initiatives
The government has played a central role in shaping the sector through supportive policies and reforms:
- FDI Reforms: 100% FDI is allowed in scheduled air transport services (automatic up to 49%, government approval beyond). For NRIs, 100% FDI is allowed under the automatic route. In MRO services, 100% FDI is fully permitted.
- Fleet Expansion Approvals: The Directorate General of Civil Aviation (DGCA) approved large fleet imports by Air India (470 aircraft) and IndiGo (500 aircraft) to be inducted between 2023–2035.
- Infrastructure Development: New terminals like the one at Dehradun Airport were inaugurated, combining heritage aesthetics with modern sustainability practices.
- UDAN-RCS Scheme: A flagship initiative, UDAN (Ude Desh ka Aam Nagrik), has operationalized 519 routes, 70 airports, 2 water aerodromes, and 9 heliports, benefiting over 13 million passengers.
- NABH (NextGen Airports for Bharat) Nirman: Plans to increase airport capacity fivefold over the next 10–15 years.
- Greenfield Airports: As of 2023, 21 projects were approved, with 11 already operationalized.
- Digi Yatra: Introduced facial recognition for seamless airport entry, initially rolled out in Delhi, Bengaluru, and Varanasi in 2022.
- C-295 Aircraft Facility: Foundation laid in Vadodara in 2022, strengthening indigenous manufacturing.
- Other Projects: Civil enclaves like the one in Jammu (?861 crore) and others across the country further highlight government investment in modernization.
Collectively, these initiatives reflect an emphasis on accessibility, affordability, and global integration.
Road Ahead
India’s aviation industry remains largely untapped, with air travel still unaffordable for much of the population. However, rising disposable incomes and a growing middle class (40% of the population) create substantial potential. The government’s UDAN-RCS scheme is key to extending affordable connectivity to underserved regions.
Future growth requires collaboration between industry stakeholders and policymakers to balance quality, cost, and passenger interests. If successful, India is well-positioned to consolidate its global ranking as the third-largest aviation market.
The broader travel and tourism sector reinforces aviation’s importance. Traveler spending was expected to reach ?9.5 lakh crore (US$ 136 billion) by 2021, while the sector’s contribution to GDP stood at ?15.7 trillion (US$ 190 billion) in 2022, with projections of ?16.5 trillion (US$ 200 billion) in 2023 and nearly ?37 trillion (US$ 450 billion) by 2032.
India’s long-term aviation outlook is equally ambitious. By 2038, the country will require 2,380 new commercial airplanes. The travel market, worth US$ 75 billion in FY20, is projected to exceed US$ 125 billion by FY27.
Conclusion
India’s civil aviation industry has entered a transformative phase, marked by strong passenger demand, growing cargo volumes, and rapid expansion of airport infrastructure. Significant investments, supportive government policies, and the entry of new players (including startups in drones and air taxis) are shaping the ecosystem. At the same time, sustainability, digitalization, and regional connectivity remain top priorities.
Despite challenges such as high fixed costs and affordability barriers, the industry is set on a robust growth trajectory. With continued reforms and stakeholder cooperation, India can leverage its demographic advantage and economic growth to cement its place as a global aviation powerhouse by the next decade.