At its present compounded annual rate of growth – 5.5 percent – cargo demand in India is expected to boost the airfreight market to 2.8 million tonnes by 2018, according to a recent report by market research analysts at Frost & Sullivan. Most of this growth, however, will benefit foreign-owned, rather than domestic, carriers.
The aggregate demand for air cargo, the analysts concluded, comes from a renewed emphasis on international trade over the last several years and a relaxation of regulations on the amount of foreign direct investment (FDI) allowed in India’s aviation sector.
“The Indian government’s FDI policies have been particularly favorable towards private participants entering the market,” said Srinath Manda, program manager, transportation and logistics practice for Frost & Sullivan. “Major policies fuelling market growth include the allowance for 100 percent FDI in existing airports and under automatic routes, as well as 100 percent tax exemption for airport projects for the next ten years.”
India’s merchandise export and import activity grew by an annual rate of 9.5 percent, on average, from 2009 to 2013, which helped drive the nationwide demand for air cargo to 2.26 million tonnes in FY 2014, the study found.
While the growth has been strong, it has been hampered by the country’s perennial problem with a lack of dedicated airfreight warehousing facilities at its major airports, Frost & Sullivan said. As a result, most warehousing facilities that exist cater to international, rather than domestic, cargo. Restrictions imposed on providing licenses to operate bonded warehouses has been causing severe capacity constraints and impeding the air cargo market.
“Evidently, opportunities for market participants lie in common-user cargo terminal development and management at airports, domestic air cargo carrier services, commercial and passenger cargo handling at airports, and perishable cargo storage facilities development and operation,” added Manda.