The Indian air cargo industry is expected to soar in the next three to four years with the economy on a solid growth trajectory and the ‘liberalisation’ of the aviation sector in the works.
However, much work on infrastructure needs to be done towards achieving this goal, said a market research report by Frost & Sullivan.
There is rising optimism that India will emerge as a new cargo hub, given its geographical location between South-East Asia and the European Union, according to the analysis. The report highlighted that the country's air cargo market was expected to grow at a compounded annual growth rate (CAGR) of about 8.3 per cent by 2013.
"Increasing globalisation, integration of the world economy, and the strengthening of India in the IT service provider space has resulted in a booming Indian economy," said the report’s authors, analysts Mr Arun Narayanan and Mr Chethan Kambi. "This has increased the aggregate demand and is an important driver for air cargo services."
The market is expected to receive a further boost with the recent raising of FDI limits up to 74 per cent in Indian cargo airlines. Such proactive and favourable government policies will greatly encourage investments in the air cargo industry and facilitate the setting up of the required amenities and infrastructure. It will also help establish multimodal cargo hubs for quick and efficient transportation of cargo, the report stressed.
Market participants would need to focus on establishing integrated air cargo complexes, including warehousing and storage facilities across the country, apart from working towards improved aviation facilities for cargo handling and increasing the freighter aircraft fleet in India. There was also the need for improved road and rail connectivity to and from the cargo hubs in order to ensure a well-developed and efficient feeder network, the study found.
"International cargo traffic is concentrated at the three key international gateway airports—Mumbai, Delhi and Chennai. With the development of supporting infrastructure at the new greenfield airports, Bengaluru and Hyderabad, and with the proposed air cargo hub at Nagpur, higher cargo traffic is expected from these airports as well.
"Although international air cargo traffic is much higher than domestic traffic, the latter offers greater potential for Indian investors, since regulations prevent foreign airlines from competing in the domestic air cargo market. This is the segment to watch, given the current robust growth in tier two towns and the need for increased connectivity for cargo movement between the tier two cities and cargo hubs," said Mr Ratan Shrivastava, Director, Aerospace and Defence Practice.
"On an average, the air freight traffic growth has been significantly higher than the gross domestic product (GDP) growth rate and this trend has been rising over the years," said Mr Narayanan in the study.
"This is the result of an increasing use of the aerial mode to transport freight, particularly perishables and time-sensitive products," Mr Shrivastava said, according to Exim News Service.