The Indian government’s Make in India campaign is set to take Indian air cargo to new heights, with an estimated growth rate of 6.7% for 2015-2016, according to India’s Ministry of Civil Aviation.
“In 2015, when all of the world was witnessing a downturn in air cargo movements, India actually witnessed growth, at a rate of 6% – quite unbelievable, but it’s true,” said Renu Singh Parmar, senior adviser at the ministry, who was giving the keynote address at the Air Cargo India 2016 conference held in Mumbai. “From April to December, domestic air cargo grew by 5% to 6%, and international cargo grew at 6.4%. You wonder how, since exports have been declining. It’s because our imports have actually gone up.”
According to an internal analysis using the ministry’s own regression models, in 2014-2015, the total tonnage in India was 2.58 million tonnes. This is projected to grow to 4.2 million tonnes in the next five years, and in the next 10 years to 6.08 million tonnes. By 2031, it is expected to reach 8.75 million tonnes.
“What we estimate for the rest of 2015-2016 is that Indian cargo in total will grow at around 6.7%,” she said. “You might find this figure very optimistic, but our figures are from April to December, after which we extrapolated them and got 6.7%, and I think this is very much achievable.”
The Make in India programme was launched in September 2014 and stimulates foreign direct investment by encouraging overseas companies to design and manufacture in India, with the aim of growing the manufacturing sector by 12% to 14% in the medium term.
“Unless we improve the proportion of the GDP taken up by manufacturing, currently at 15% to 16%, to about 25%, we will not be able to create the all-important additional 100 million jobs that we’re looking for,” she said. “This is the vision that Make in India begins with.”
To further promote the campaign, the government recently organized Make In India Week, a week of meetings, seminars and exhibitions that took place in Mumbai in February 2016.
“There was a gathering of industry from all across the world, and there were a lot of discussions on what kind of investments can be brought in for kickstarting Make in India,” said Parmar. “And believe me, it has already started. There has been a lot of interest shown by our foreign participants and a lot of FDI MoU proposals have already been signed. Going forward, I sincerely hope that this is the trajectory that we’ll be touching as far as air cargo is concerned.”
One of the main areas the campaign hopes to address and improve is the ease of doing business.
“A lot of mechanisms have already been put forth to make doing business much simpler – cutting down the red tape and cutting down the number of applications, setting up a single-window clearance and easing environmental approvals,” said Parmar. “Apart from this, there are various incentives available to both domestic and foreign manufacturers.”
In terms of air cargo specifically, the country is looking at a shift to paperless cargo processing and e-freight, according to Parmar.
“We’re also trying to look at how customs procedures can be streamlined and how much faster we can move, so that dwell time, especially as far as imports are concerned, can be brought down,” she said. “Right now, the dwell time in this country is dismal. We have already commissioned a study for this, and the findings are already in. We’re very clear as to how we’re going to map out the strategy for it. This will be done within the year and hopefully dwell time will come down to about 48 hours for imports.”
Improved dwell times are likely to encourage foreign investors and make them more confident. In 2014-2015, FDI flows into civil aviation and air freight in India grew by 69% year-on-year, said Parmar, and it is estimated that from April to September 2015, around US$34 million in investment have gone into the country. Cumulatively, about US$604 million worth of investments have been witnessed in the Indian civil aviation sector so far.
Additionally, the government has been working on a civil aviation policy for the last six to seven months.
“This policy encapsulates a very major paragraph on air cargo that hitherto had not been included as such,” said Parmar. “We’re now looking at a number of incentives for the air cargo sector and we’re also looking at easing the business environment as far as air cargo processing is concerned. One of the major incentives we’re hoping to bring in is to give infrastructure status for air cargo if it is co-located at the airport. This will be a very major step forward because it will give the players a 10-year tax holiday.”
The management of costs associated with infrastructure is something that the government will have to tackle if it is serious about the air freight industry, according to Parmar.
“Cargo is the backbone of manufacturing, and for that a very robust supply-chain infrastructure is what we require,” she said. “However, this will have to be managed in India because 30% to 40% of the GDP forms all logistics costs. So if manufacturing has to grow, then we’ll have to cut the cost of logistics. Abroad, in developed markets, the cost of logistics is only 7% or 8%, so we have to think of increasing our competitiveness, but this can be done if we can bring down our overall costs in logistics supply.”
Overall, Parmar was very upbeat about the prospects for the air cargo industry in India, whose economy grew approximately 7.5% in 2015 compared to China’s 6.5%, according to the International Monetary Fund.
“It’s not difficult to say that in the years to come, as is forecast, India will be the third-largest economy in the world,” she said. “And I think all of you who are sitting here know that this is the case, and that this is the land of opportunity.”
By Jeffrey Lee
Asia Cargo News | Mumbai
