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Aviation vital for economy

Modern airports are critical for a vibrant economy. International Civil Aviation Organisation (ICAO) estimates that every $100 spent on air transport generates benefits worth $325 for the economy.

india Updated: Jan 23, 2006 00:32 IST

Modern airports are critical for a vibrant economy. International Civil Aviation Organisation (ICAO) estimates that every $100 spent on air transport generates benefits worth $325 for the economy.

A FICCI survey points out that 91 per cent of foreign investors rate Indian airports as average to bad, and prefer to do business in China, Hong Kong or Singapore. A UNCTAD report in 2003 underlined that modern airports have a direct bearing on foreign direct investment and suggested that before laying the red carpet for global investors, the developing countries must augment their gateway airports. The same reality has perhaps prompted Prime Minister Manmohan Singh to emphasise that India must modernise its airports and upgrade connectivity of its regional hubs if we want to achieve 10 per cent GDP growth.

One of the most important economic benefits of modern airports is its spin-off effect on trade. It increases the companies' global reach and enables it to get to the market quickly. Air transport helps countries to push GDP growth and earn foreign exchange. Internationally airlines are a $400 billion industry generating $1.3 trillion in economic activity. In India, according to NCAER estimates, foreign exchange transactions of $22.5 billion are directly facilitated by civil aviation and another $96 billion indirectly through aviation related services. This figure can double if our airports are upgraded to international standards in the next five years.

An IATA study last year of companies in China, France and US found that 90 per cent of firms consider air services critical for business meetings. It points out that dependence on air services means that firms have incentives to locate their operations in the vicinity of major airports. This is exactly what Infosys CEO N R Narayana Murthy has been saying about the role of Bangalore International Airport in making the IT city a global outsourcing hub.

The second most important offshoot of modern airports is job creation and boost to tourism. An ICAO study estimates an additional hundred direct jobs in air transport create 610 new indirect jobs. Globally, air transport industry generates 29 million jobs, out of which only 5 million are direct. The bulk, 19 million, is employed indirectly in the supply chain, logistics, transport and catering services. And about 15.5 million are directly and indirectly employed in tourism.

In fact, a 2003 Campbell-Hill Aviation Group study of Houston Airport System (a network of three airports) found that the airport handling 42 million passengers and 740 million pounds of freight supports 1,51,000 jobs in the local economy. The study estimated that the employment level would double as passenger numbers are expected to go up to 80 million by 2020.

India can take a cue from this as our air passenger traffic, both domestic and international, is expected to increase from 20 million now to 60 million by the end of this decade. According to Centre for Asia Pacific Aviation estimates there's a potential of creating 1.5 million more job if modernisation and construction of greenfield airports takes off on schedule.

An efficient aviation sector is essential to support the tourism sector. Worldwide tourism accounts for 10.2 per cent of GDP while in India it is not even half at just 4.8 per cent. The share of India in total world aviation traffic continues to remain a minuscule 24 lakh. It is estimated that modernisation of airports would double India's foreign tourist arrivals, creating a ripple effect on the economy. In the US, Metropolitan Airports Commission study on economic impact of tourism at Minneapolis airport found that the biggest impact on the local economy is visitor spending, which accounts for 75 per cent of jobs in hotels, restaurants and transport, among other things.

First Published: Jan 09, 2006 01:31 IST