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On the tarmac, India looks unstoppable. Delhi’s fourth runway and twin elevated taxiways are designed to raise the Capital’s throughput to a staggering 109 mn passengers a year – higher than the tally of Atlanta, the world’s busiest airport.
Two new megahubs – Navi Mumbai, built to accommodate 60-90 mn travellers, and Noida’s Jewar airport, planned for 70 mn – are racing towards mid-decade openings. Meanwhile, domestic carriers have ordered 1,359 jets, led by IndiGo‘s record 500-plane Airbus deal and Air India‘s 470-aircraft shopping spree. Yet, above this hardware boom hangs a policy bottleneck: 116 air service agreements (ASAs) that New Delhi has signed, dictating the terms of air operations with different nations.
While ASAs are meant to facilitate travel between nations, their lack of dynamism leads to exhaustion of capacity and demand pile-up. For instance, the marquee India-Dubai bilateral still caps each side at 65,000 weekly seats, a limit last adjusted in 2014, which is now almost sold out.
It is not just the bilateral with Dubai but individual MoUs with the Emirates (Abu Dhabi, Sharjah and Ras Al Khaimah) that are holding back Indian aviation growth – considering the strong 40 lakh Indian diaspora in the UAE. The result: fares surge during holiday seasons, middle-class families detour through Doha or Riyadh, and India’s new terminals risk turning into gleaming domestic halls attached to half-shut international doors.
The stakes are macroeconomic, not merely logistical.
GDP boost
IATA research finds that every 10% rise in a country’s air-connectivity index lifts labour productivity by about 0.07%. For an economy approaching $4.1 tn, even a modest 10% connectivity bump created by phased liberalisation would add $2.9 bn to annual output. Aviation supports 7.7 mn jobs and contributes $53.6 bn, or 1.55 of GDP. Applying the same ratios suggests that closing the connectivity gap could create about 4,10,000 additional jobs across airlines, airports, logistics and supply chains.
Namaste India
GoI data shows forex earnings from tourists hit ₹2,31,927 cr ($28 bn) from 9.52 mn foreign tourist arrivals in 2023. A single extra million inbound travellers – plausible once fares drop and seats expand – would pump close to $3 bn more into hotels, restaurants and heritage sites.
An ORF study, ‘Combined Skies: Unlocking the Benefits of UAE-India Aviation Liberalisation for Indian Travellers’, indicates that each 1% rise in India-UAE passenger volume trims average fares by about 0.2%.
Consumer is king
Granting Dubai the extra 50,000 weekly seats – roughly a 75% capacity jump – could shave 10- 15% off typical ticket prices, delivering an annual consumer surplus windfall well north of $100 mn. Gradual liberalisation in UAE-India air services can generate benefits for Indian consumers upwards of $1 bn.
Keeping bilateral quotas frozen while airport and fleet capacity explode is the economic equivalent of building an eight-lane expressway and barricading four lanes at the toll booth.
Gulf and Southeast Asian hubs are only too happy to harvest the spillover: roughly 30% of India’s international traffic now flies to or through the UAE, clogging overseas runways that could just as well be Indian transfer points.
The protectionist argument – foreign mega-carriers will cannibalise home airlines – does not hold up against regional evidence. Asean’s phased Single Aviation Market lifted third-, fourth- and fifth-freedom restrictions during the 2010s and saw passenger volumes and low-cost carrier penetration soar without extinguishing national champions.
India’s carriers need open markets more than shelter, the freeze on rights hurts their ability to sweat those shiny new A321neos and A350s across profitable international routes.
The debate over air services liberalisation is no longer a niche quarrel between airline CEOs and civil aviation bureaucrats. It is a strategic lever for growth, jobs and global stature. India has runways, terminals, aircraft and, critically, the demand. What it lacks is the regulatory clearance to knit these assets into a seamless Indo-Pacific air-logistics network.
Liberalising bilaterals – starting with a transparent, time-bound schedule of 15-20% annual seat increases between India and the UAE – would align policy with infra, slash fares, lift GDP, and propel millions of tourists directly into India’s burgeoning hospitality economy.
The alternative is to watch the world’s fastest-growing aviation market taxi in circles while its neighbours claim the skies. The runway is built. The engines are spooled. New Delhi’s only job now is to tell Indian aviation: wheels-up.
The writer is researcher, Centre for New Economic Diplomacy, ORF.
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