In today’s Finshots, we tell you about what India needs to fix in aviation to truly compete on a global scale. 

The Story

India recently became the 4th largest economy. And one of the fastest ways a country can increase its GDP is through trade with other countries. Take China, for instance. Their GDP was about $150 billion in 1978 or hardly 1.7% of the global economy. However, since they opened up their economy that year, it led to exponential growth, and they’re now the 2nd largest nation in the world in GDP terms.

And this is the case with pretty much every other country in the world. Global trade is one of the fastest ways to grow your economy and drag millions of people out of poverty along the way. 

This is because trade does a few important things. It gives domestic companies access to a much larger customer base. So, instead of just selling to people within the country, they can sell to the entire world. It also brings in foreign investments, fuels competition, and pushes businesses to become more efficient and innovative. This, in turn, creates jobs, improves access to technology and raises productivity across sectors. Over time, this leads to more income, more spending and a faster-growing economy.

A major link in this maritime trade, which contributes to the majority of global trade. Close to 90%. 

But Aviation also contributes significantly. Not by volume, but by value. This is why, even though it carries only 0.3% of the total volume of cargo, it carries 13% of the value of all global trade. If you want to send something quickly, something valuable, or something secure, air transport is the way to go.

And apart from just cargo transportation, air travel is also becoming an important part of everyday life in India. In fact, India’s air travel industry is expected to double by 2030. Naturally, this means more passengers, more aircraft and more airports. And this can have a multiplier effect on the economy. It boosts tourism, facilitates business travel, enables quicker movement of high-value goods and connects remote regions to the rest of the world.

Think about it this way: today, if you want to travel from nearly any point on the globe to another, you can do it in under 48 hours. That’s something humanity couldn’t have imagined just a century ago. Back then, such journeys would’ve taken weeks, even months, by sea or land. So yeah, the transformation has been nothing short of extraordinary. 

But this has only been possible because countries have invested heavily in technology and infrastructure, built massive airports and fostered policies that support this connectivity. In fact, nations that recognize aviation as a strategic growth sector tend to integrate faster with global markets.

And India has a real shot at doing exactly that.

Even in the recent IATA AGM held in New Delhi, PM Modi mentioned that India’s flyer footfall is expected to double in the next 5 years. This means that airlines in India will also double their fleet to around 1,500 aircraft by 2030. This signals a serious ramp-up in air travel demand. However, there’s one gaping hole that we need to address before this expansion happens.

You see, over 80% of aircraft maintenance still happens abroad, in places such as Dubai, Singapore or Colombo. And this outsourcing costs Indian airline carriers thousands of crores every year, apart from costing the state exchequer millions of dollars in forex reserves.

This is why, while addressing the IATA Annual General Meeting in New Delhi, the government made it clear that this needs to change and transform India into a $4 billion Maintenance, Repair, and Overhaul (MRO) hub within the next five years. And to support that vision, there have to be policy changes such as reduced customs duties on aircraft parts and the creation of dedicated MRO zones near important airports.

It’s a bold target. But getting there won’t be easy.

For starters, the cost of doing MRO business in India has historically been high. Until recently, imported spare parts attracted an 18% Goods and Services Tax (GST). Compare that with other countries in the region that have much lower or even zero tax rates for aviation spares, and you can see why Indian airlines prefer sending aircraft abroad. This is why the government recently reduced the GST rate to 5% on all aircraft and engine parts. On top of that, there are state-level levies, compliance hurdles, and a maze of approvals that make the entire process painfully slow and expensive.

Then there’s the infrastructure gap. India still lacks enough wide-body aircraft hangars and a trained workforce to handle complex maintenance tasks, which is essential for servicing long-haul jets. Regulation is also fragmented, skills are unevenly distributed, and the pace of execution hasn’t matched the ambition.

IATA itself has raised a red flag, warning that if we don’t simplify our tax regime and streamline other policies, we could squander our natural advantage, especially at a time when air traffic is booming and aircraft orders are flying in thick and fast.

But the opportunity is too big to ignore. And if policymakers are serious about capturing this spend, they’ll need to go beyond token gestures. Rationalizing GST from 18% to 5% was a game-changer. Allowing 100% foreign direct investment (FDI) in standalone MRO facilities could also attract foreign capital and global expertise. And clubbing civil and defense MRO work under one umbrella could lift utilization rates and make the business more viable.

But of course, this shift won’t come without trade-offs. Security and quality control will become even more critical when private players enter such a strategic space. Just recently, Celebi Aviation, a major ground-handling player, was under scrutiny over security concerns. That’s the kind of vulnerability India must guard against if it wants to build global trust in its aviation ecosystem.

Still, the $4 billion target isn’t some far-off dream. With steady policy follow-through, serious investment in skill development, and a focus on ease of doing business, India can absolutely become a world-class MRO hub. But without that commitment, the country might end up watching a major opportunity taxi away, while others take off.

Until then…

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