Impact of pre and post industrial policies on Aviation Industry

The methodology of reforms introduced in India in July 1991 introduced a combination of macroeconomic adjustment and structural adjustment. It was directed by short term targets and long haul targets. 



Adjustments were important in the short run to re-establish balance of payments and to control inflation. Simultaneously, changing the design of institutions themselves through reforms was equally significant according to long haul perspective.


 The new government moved earnestly to carry out a program of macroeconomic adjustment through fiscal correction. Other than this, underlying changes were started in the field of trade, industry and the public area.

Impact of pre and post industrial policies on Aviation Industry

Impact of Pre 1991 industrial policies on Aviation

According to tradechakra, Aviation Industry in India started in 1912 when the first flight took off from Karachi to Delhi.  Indian State Air Services initiated this industry, in partnership with Imperial Airways UK. But the real initiation for Aviation Industry In India was in 1932 when Mr. JRD Tata started Tata Airline. In 1946 Tata Airlines was renamed as Air India.

Nine air transport companies transporting both cargo and passenger traffic belonged to India after the Independence.  All the existing airline assets were nationalized by the Indian Government in 1953.

The main move towards Liberalization was started in 1986 when private aircrafts were allowed to begin charter and non- booked administrations to all approved air terminals under the Air Taxi Scheme.

They were likewise allowed to settle on their own choices regarding fares and schedules. A significant stage towards Liberalization was in 1990 when India started an open sky strategy for freight which gave authorization to foreign aircrafts to run freight trips without limitations and to charge rate without being constrained by Director General of Civil Aviation (DGCA).

Catering domestic market was assigned to Indian Airline and International sector was looked after by Air India. Indian Airline and Air India both enjoyed monopoly over the Indian skies. However, like any other industry, this industry also suffered from certain limitations pre 1991 industrial policies.

 The services provided was poor, there was frequent delay in flights and   travelers had to face innumerous hardships frequently. But the scenario changed post 1991 policies. 

Impact of Post 1991 industrial policies on Aviation


Post 1991 , after the introduction of new industrial policies,  unprecedented growth for both domestic and foreign passenger sector was witnessed by aviation industry. According to tradechakra, “ the monopoly of Indian Airlines and Air India over the Indian skies came to an end”. The substantial growth in the Aviation industry post 1991 was due to:

  • The entry of private players, increased competition ensured better services were provided to the customer.
  • The landscape of the aviation industry changed by the  entry of low-cost carriers like Deccan, Spice jet, Go Air. According to tradechakra “the no off first time fliers in both urban and rural India increased dramatically”.


In 1994 Air Corporation act was passed. With the introduction of the act, private service organizations could now perform both booked and non-planned administrations in the domestic sector with no restrictions on the size or type of airplane.

However, to ensure traveler's wellbeing, security etc, legitimate development of air transport benefits and defeating infrastructural imperatives in numerous air terminals were required. Government gave authorization for expansion to capacity depending on increase in air traffic gauge.

In 1994-95, government allowed straightforwardly to import aeronautics turbine fuel (ATF). In 1997-98 to take the course of liberalization above and beyond, foreign equity participation and  cooperation up to 40 percent (100 percent for NRI's) was permitted in the domestic airline segment. Yet, International service providers couldn't take stakes either straightforwardly or by implication without endorsement from DGCA.

Government Initiative To Promote Aviation Industry :

        FDI in Air Transport Services (Domestic Airlines) has gone up from 40% to 49 percent. NRI's and Persons Of Indian Origin (PIO) have been permitted 100 % FDI.

        Private Service suppliers with five years' involvement with homegrown area and having fleet size of twenty airplanes were offered permit to work in International routes. Jet Airways and Kingfisher aircrafts have begun to operate in International destinations.

        The airplane rules were modified to guarantee and ensure that the Aviation business stays up with international norms and improvements.

        Air India and Indian Airlines were converged to make them more proficient.

        Greenfield air terminals at Bangalore and Hyderabad were finished and Delhi and Mumbai air terminals were rebuilt.

Passage Of Low Cost Carriers (LCC)

The LCC development in India was as Low Price Tags, Apex Fares, Internet Auctions, Bulk Purchases and Last Day Fares. The justification for the development of LCC is:

 .          Low Entry Barrier

        Attraction Of Foreign Shores

        Increased Permitted Foreign Equity

        Rising Income Levels And Demographic Profile.

        High load proficiency.

        Operations to remote areas.

        Low cost and Low Frill plan of action.

        Staff strength was kept to a base(minimum).

        Operations to adjoining nations like Sri Lanka.

        Successfully infiltrating the rising working class and first time fliers.


Forecasts which were made during that period:

        The Center For Asia Pacific Aviation (CAPA) has anticipated that homegrown traffic will increment by 25 to 30 percent till 2010 and International traffic development by 15% by 2010.

        By 2020, 400 million Indian travelers are probably going to be flying and Indian air terminals would deal with in excess of 100 million travelers.

        The Aviation industry must be made prepared regarding foreign carriers  particularly from the Middle East. The profitability of the aircraft operators in India were eroded due to global meltdown and decrease in air travel caused by terrorist activities.

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