How FDI Helps in the Development of Indian Civil Aviation Sector?
In the current global economy, connectivity is important for several reasons. This includes transporting people to work, travellers to locations and goods to markets. All these things are essential for India’s advancement. 49% of FDI in Civil Aviation was introduced to revive the ailing sector of the country.
It was expected that this would comprise foreign direct investment in both the civil aviation sector and foreign portfolio investment, among other investments. Despite the government approving FDI in the civil aviation industry previously, local airlines were not permitted to invest in domestic transporters.
Requirement for FDI in Civil Aviation Industry
The FDI of international airlines in the civil aviation sector is turning into a topic of conversation. Taking into account that several airlines revealed losses in the preceding fiscal year, the industry is facing some actual issues. Some of them are listed below-
- Low-quality infrastructure
- Expensive airport fees
- Fierce competition
- Biassed tax arrangements
- Incompetent management
As per various experts, the chances of foreign airlines re-energising domestic airlines are slim. It is due to the losses faced by a lot of airlines regarding increasing expenses and taxes.
The challenges being faced by the sector comprise profitability issues rather than investment. It is a major problem that cannot be remedied by the foreign airlines. This is because they are unable to alter the country’s tax systems.
FDI in Civil Aviation by foreign airlines in the domestic ones is a good step irrespective of their ability to revitalise the aviation sector. International airlines are prohibited from participating in Indian airlines under the global practice. However, the 49 per cent international limitation is provided under the automatic route.
FDI in Airline Services
100% FDI is permitted for the scheduled airline and regional aviation services. Amongst these, 49% are authorised via the automatic route. Government approval is required for receiving an FDI of more than 49%. In spite of this, full FDI is permitted for NRI investors by the automatic route.
In the case of non-scheduled airline services, complete FDI is approved under the automatic route. 100% FDI is permitted regarding the services of helicopters and seaplanes.
Benefits of International Policies for the Airline Industry
The Indian aviation industry is in an era where the quantity of passengers is increasing rapidly. The frequent increase in the number of passengers is also being experienced by Tier 2 and Tier 3 cities. It provides a lucrative opportunity to any international investor as the increasing quantity of passengers will ensure higher returns on investment.
Final Note
The introduction of FDI in Civil Aviation was brought by the government to rejuvenate the Indian civil aviation industry. Making investments in Indian organisations that offer airline services which are either scheduled or non-scheduled are approved for 49% at the topmost. It is taken from the contributed capital and comes with certain restrictions.
Consult With FDI
We at FDI India aim to make the complex structure of foreign investments and transactions under FDI simple through years of experience in the field. Our objective is to transform the face of FDI’s Indian facilitation services by keeping our focus on helping Indian businesses by offering sustainable investments and loans. FDI India is transforming the investment climate of the nation by making the business environment for investors simple.
READ ALSO:
Impact of FDI on the Investments in the Indian Education Sector