Economic Survey 2025-26 – Civil Aviation: India on a Sustained Growth Path

By R Anil Kumar

• India’s Civil Aviation Sector on a Sustained growth trajectory- Economic Survey

• India Aviation Surges: Survey Signals Sector as Economic Powerhouse

Bengaluru. India’s Economic Survey projects robust GDP growth for FY27, but the civil aviation sector is exhibiting an even more accelerated expansion. Despite a significantly lower airport density compared to global benchmarks, India is rapidly scaling its airport infrastructure and passenger handling capabilities. This growth, underpinned by supportive government policies and increasing consumer demand, positions aviation as a critical engine for economic connectivity and a compelling sector for future development.

The Aviation Sector: A Leading Indicator of India’s Growth

While the Economic Survey projects India’s GDP to grow between 6.8% and 7.2% in FY27, signaling sustained economic resilience, the nation’s civil aviation sector is demonstrating an even more dynamic growth trajectory. This sector is not merely benefiting from the broader economic upswing but is actively serving as a catalyst, driven by ambitious infrastructure development and a rapidly expanding passenger base. The Economic Survey itself highlights the sector’s sustained growth, supported by a conducive policy environment and infrastructure expansion.

Infrastructure Boom Amidst Low Density

India’s airport infrastructure is expanding at an unprecedented pace, aiming to bridge a significant gap in density. With approximately 0.11 airports per million people, India lags far behind global peers like the United States (47.35) and China (0.39).This disparity underscores the vast potential for development. The number of operational airports has more than doubled since 2014, reaching 164 by 2025. Further enhancing capacity, the government has approved 24 greenfield airports, with 13 already operational. Projections indicate a continued build-out, with targets to operate over 400 airports by 2047. This expansion is backed by substantial investment, with the Adani Group alone planning approximately US$21 billion over the next decade for airport infrastructure enhancement.

Passenger Traffic Surges, Cargo Expands:

The surge in passenger traffic is a primary indicator of this sector’s strength. In FY25, Indian airports handled approximately 412 million passengers, a 10% increase from the previous year. Projections suggest this figure could reach 665 million by FY31. While domestic passenger growth saw some moderation in late 2025 due to disruptions, international travel has shown robust expansion, growing at 7.3% in the April-November 2025 period. The air cargo segment also continues to expand, handling 3.72 million metric tonnes in FY25, with forecasts predicting continued growth, albeit at a moderated pace of around 5-7% in FY26. The Red Sea crisis has also provided a tailwind, boosting international air cargo volumes.

Policy Drivers and Ecosystem Development:

Government initiatives like the UDAN (Ude Desh ka Aam Nagrik) scheme have been instrumental in democratizing air travel and enhancing regional connectivity, linking previously underserved areas and connecting 93 airports through 657 routes. With plans to expand UDAN to 120 new destinations, the scheme is evolving to sustain routes and become more financially viable for airlines. Beyond connectivity, there’s a growing emphasis on developing the ancillary ecosystem, including Maintenance, Repair, and Overhaul (MRO) facilities and aircraft manufacturing, aligning with national self-reliance goals.

Headwinds and Competitive Landscape:

Despite the optimistic outlook, the aviation sector faces considerable headwinds. Aviation Turbine Fuel (ATF) costs, accounting for 40-45% of operating expenses, remain volatile and subject to varied state-level taxes. Challenges also include infrastructure limitations at some regional airports, pilot shortages, and the need for enhanced maintenance capabilities. The sector’s financial health is also a concern, with ICRA estimating industry net losses of ₹17,000–18,000 crore in FY26, partly due to disruptive events and fleet inspections. While Indian carriers are growing their fleets, their combined strength is still smaller than some individual global airlines, though India holds immense potential for expansion, poised to become the world’s third-largest aviation market by 2030.

On January 28, Prime Minister Narendra Modi highlighted the growth potential and policy stability as he wooed investors, saying that there are immense opportunities in aircraft manufacturing, pilot training, advanced air mobility and aircraft leasing areas, in the country. PM Modi in a special message at an aviation summit had also said that the government is working on all necessary regulatory reforms to make cargo movement faster and more efficient.