Over the last decade, India's sustained focus on infrastructure development, job creation and the rising middle class with higher disposable income has significantly improved its global economic standing, moving it from the 10th rank by GDP in 2014 to the fifth-largest today. The aviation and aerospace sector has been crucial, increasing its GDP contribution from around 3% in 2014 to 7% in 2024. This growth is due to the increase in operational airports from 74 to 157, a three-fold growth in domestic passengers, the successful privatisation of Air India, and the launch of the regional connectivity scheme, UDAN.
As the Indian economy aims to overtake Japan and Germany to be No. 3 in the world in three to four years, here's a bold prediction: our aviation and aerospace industry can fly us there sooner — as early as fiscal 2027. It is time for us to think bigger about airlines, airport infrastructure and aerospace manufacturing, and maintenance, repair, and operations (MRO) and how they can be transformational for India.
India's Potential
1. High Multiplier Effect: According to industry research, investments in aviation and aerospace have a significantly higher multiplier effect (3.1x) on GDP compared to other sectors. For every Rs 1,000 crore invested, the return is over Rs 3,100 crore, boosting direct and indirect jobs with an employment multiplier of six.
2. Growth Template from China: Thirty years ago, China had 850 civilian aircraft, growing to about 8,000 today. India currently has around 800 planes, with over 1,700 on order by 2028. By 2027, India is expected to add $1 trillion to its GDP, necessitating efficient transportation to harness this growth.
3. Policy changes to unlock potential: While the government will address ways to increase consumer spending, aviation-specific measures, such as a government-backed credit guarantee scheme to encourage lessors to lower rates for regional airlines, will be a welcome relief.
Time It Right
Given the GDP growth, the timing and context are ideal for India to enhance its focus on aviation and aerospace. Can airlines become an affordable travel option for millions of Indians, competing with rail and intercity road travel? The rapid growth in the sector suggests that this may be achievable.
The number of civilian aircraft, which has doubled over the past decade, will further treble by 2028, extending the aviation map to 220 airports. Industry forecasts predict that air traffic growth in India will be nearly 7% until 2040, outpacing regions like Southeast Asia (5.5%), China (5.4%), Africa (5.4%), and Latin America (4.8%). India is already the third-largest domestic air passenger market globally, behind only the US and China.
Make In India, Fly It Global
India has made significant progress in aerospace manufacturing in recent years, including big wins in defence aviation. Leading global air framers either operate large-scale manufacturing in India or source parts worth billions of dollars from the country. At GE Aerospace, we are investing Rs 240 crore to expand our multi-modal factory near Pune, which supplies components for the G90, GEnx, GE 9X, and LEAP engines. This follows a significant increase in our sourcing from India since 2018.
That said, India needs to move up the aerospace manufacturing value chain. Revisiting performance-linked incentives (PLI) schemes, similar to those in place for drone manufacturing, could be beneficial. A long-term goal is to attract aircraft makers to set up factories in India, as Prime Minister Narendra Modi has envisioned. In the medium term, expanding the group of Tier 1, 2, and 3 manufacturers in India is a realistic and sustainable vision.
MRO, The Next Big Thing
After aviation fuel, MRO is the second biggest cost for airlines, accounting for 12-15% of spend. Most MRO work outside the US, Europe, and China is done in Singapore, the UAE, Malaysia, and Turkey. With an aim to meet 90% of domestic MRO needs in India by 2028, the government has introduced a uniform 5% IGST on parts, designated MRO hubs as free trade zones, and extended export-import tax incentives to reduce leasing costs of spares.
In December 2024, Air Works Group, India's largest independent aviation services and MRO company, was acquired by Adani Group, indicating that policy reforms are attracting large players. Ensuring compliance with offset norms, clarifying the future of government-owned AI Airport Services Ltd, and making DGCA certification acceptable to US and European regulators (FAA and EASA) will help further.
Another critical aspect of this growth is talent. Aerospace manufacturing requires highly skilled workers who need regular training. For example, GE Aerospace has trained over 5,000 people in precision manufacturing at its Pune factory in 10 years. The industry requires a comprehensive government-supported skilling initiative to train thousands of engineers and workers to meet the demand for specialists in aerospace factories.
Aerospace gives India the unique opportunity to bet on a sector with a massive impact on both services and manufacturing. The Union Budget should seize upon this golden moment.
(Vikram Rai is South Asia CEO, GE Aerospace)
Disclaimer: These are the personal opinions of the author
