Indian Election: Implications for aviation sector. Air India must be a key priority

The world's largest democratic exercise, involving an electorate of 714 million voters, came to a surprising conclusion over the weekend, but one which bodes well for India's political stability and economic growth. Despite predictions of a hung parliament leading to a fractured coalition government of disparate political parties, the ruling Congress Party was returned to power with its strongest performance in two decades. Overall, the re-election of the government could spell good news for India's aviation industry...

See related article: India Aviation SWOT Analysis.

Economic reform agenda given a boost

Although the party and its pre-poll allies fell just short of an overall majority, the new administration will no longer have to rely on the support of Communist parties which had regularly blocked Prime Minister Manmohan Singh's policy agenda during the last term. The prospect of continuity, stability and an acceleration of economic reform should result in renewed business and investor confidence in India.

This spells good news for India's aviation industry, as economic growth is a key driver of traffic. Furthermore, the government will be free to continue its policies which include encouraging private sector participation and liberalisation of aviation.

Under Praful Patel, the Civil Aviation Ministry was considered one of the most dynamic and successful in the last government. Minister Patel deserves great credit for his historic achievements and despite the current challenges faced by the industry, he leaves a very strong legacy. His success, drive and capabilities mean that he is likely to be called upon to apply his touch at another key infrastructure or energy related portfolio. Indian aviation will be hoping that Minister Patel's successor is able to follow in his footsteps.

Fixing Air India an urgent task

That said, the incoming Minister will take charge at a difficult time. The airline industry is facing unprecedented financial challenges and a number of issues require urgent attention.

The Minister will be confronted by some important and pressing issues. These include:

  • The future of Air India;
  • The establishment of an airport economic regulator;
  • Opening up investment by foreign airlines in Indian carriers;
  • Fast tracking the development of Navi Mumbai Airport; and
  • Ensuring that Indian carriers are able to effectively compete globally.

Apart from the likely change at the top, new faces have assumed charge at several key positions in the last few months, notably the Chairman & Managing Director of Air India, the Chairman of the Airports Authority of India and the Director General of Civil Aviation.

India has been fortunate to have a strong bureaucracy, with some very capable Civil Aviation Secretaries in recent times. It is unclear yet whether there will be any changes at this level.

The election result marks an exciting and highly positive moment for India and brings renewed hope of achieving the target of double digit GDP growth.

The aviation industry will be hoping that the opportunity now exists to combine structural reform and market growth to create a vibrant and viable sector.

It won't be easy by any means, but after the challenges of recent times, that sense of optimism will be very welcome.

For further analysis, contact our team at CAPA India, or read the upcoming June edition of the Monthly Essential India.

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