India's New Foreign Direct Investment (FDI) Regime in the Airline Industry: Changes and Challenges

Abstract

By 2022, India is forecast to become the third-largest civil aviation market after the U.S. and China. Since 2010, the market has grown 27% per annum domestically and 7.7% internationally. Yet there has been an imbalance in regulatory evolution. Consequently, regulators have been holding back even faster expansion and sustainability of India’s aviation sector. The Indian Government is finally tackling these challenges and proposing reforms via two policies: the National Civil Aviation Policy 2016 and the Consolidated FDI Policy Circular of 2016. The National Policy proposes deregulation of 22 areas in order to remove constraints and foster growth. The FDI Policy proposes relaxing the FDI rules for important sectors including civil aviation. This paper discusses possible changes in the Indian aviation sector resulting from the FDI policy. This includes to what extent joint venture airlines (such as AirAsia India and Singapore Airlines-backed Vistara) can benefit from the new FDI policy. Are the benefits as expansive and significant as discussed in the media? This paper will also analyze the remaining obstacles preventing Indian airlines from flourishing on the international stage.

Keywords: aviation, FDI, airline industry, aviation law, ownership and control