India's recent economic performance and vast potential for future growth makes it one of the great and growing markets for aviation. But economic performance and aviation are closely linked and a thriving air transport sector is vital to unleashing India's full potential.

Globally, the aviation industry generates $2.9 trillion (Rs 1,30,50,000 crore) in economic activity and supports 29 million jobs, according to a recent study commissioned by the Air Transport Action Group. Airlines connect people to business, tourists to destinations and products to markets on a global scale. It connects regions within nations, overcoming land transport deficiencies. It provides substantial social benefits by giving access to remote areas and as a fundamental mechanism for effective humanitarian relief, as witnessed following the tragedies of the Indian Ocean tsunami and the Kashmiri earthquake.

Right now, the Indian airline sector is vibrant. Indian carriers placed over $12 billion (Rs 54,000 crore) in new aircraft orders at this year's Paris Air Show. Air-India, Jet Airways and Indian (Airlines) all posted profits last year. The number of carriers operating in India has grown from two state-owned players in 1991 to 11 today. And another four carriers are set to start operations soon.

Traffic is buoyant. IATA (International Air Transport Association) member carriers' forecast for India projects international passenger traffic growth of 8.4 per cent annually between now and 2009. Adding in domestic traffic, that figure comes close to 12 per cent. Freight is no different. The Indian market for international freight is expected to grow by nearly 10 per cent annually over the next five years. Both measures rank India among the fastest growing markets for air transport.

Generally, air transport grows at twice the rate of GDP. With Indian GDP expected to expand at 7.2 per cent between 2005 and 2009, we expect growth in the 15 per cent range. However, the Indian market still faces a large degree of catch up. In 2004, India's airlines were ranked 20 by International Civil Aviation Organization in terms of total passenger and cargo tonne-kilometres, lower even than Luxembourg.

Another example is tourism. Some 40 per cent of international tourists travel by air. According to the World Travel & Tourism Council, international tourists account for a quarter of the annual $3 trillion (Rs 1,35,00,000 crore) global tourism spend. India has enormous tourism potential. And the markets of West Asia, South East Asia and East Asia are among the most buoyant. Yet, India's airports handle just over 14 million passengers. Compare that to Thailand or Singapore, both of which handle well over 20 million passengers. Clearly, there is much unexploited tourism potential.

How do we unlock India's massive potential? The airlines are moving fast. Government policy, especially on liberalisation, is moving in the right direction. The open bilateral with Sri Lanka has shown the benefits of allowing market forces to work.

However, let me highlight three challenges that could put at risk the government's excellent aviation policy initiatives:

• Enhanced safety;
• Cost-efficient improvement of infrastructure; and
• Reasonable taxation

If these are handled correctly, the positive economic impact on India will be great.

Safety is the number one priority. And it is an underlying element for sustainable growth. India's record on safety is good, but constant attention and efforts are needed. As part of our commitment to safety, IATA and its members developed the IATA Operational Safety Audit (IOSA)-the first global standard for airline operational safety management. In just over two years, IOSA has become the industry standard. Globally, over 140 airlines will be in the IOSA process by the end of 2005. That represents 70 per cent of scheduled international traffic. Jet Airways and Air-India are among them. Importantly, all the IATA airlines are committed to the IOSA programme.

Regulators around the world have been quick to see the benefits of IOSA. US carriers, for example, can submit IOSA results to their regulator to demonstrate the operational safety level of their code-share partners. We are already working with the governments of Egypt, Chile and Jordan to help make IOSA a condition of the certification process. As the size of India's air transport sector expands, global standards will be critical. IOSA is a tool available to the government to help enhance India's safety oversight programme.

Indian airport and airspace capacity are far behind the expansion that airlines have made. The 2002-2004 moratorium on major capital expenditure at India's airports has taken its toll on already overused infrastructure. Mumbai airport is the most critical. At the best of times, capacity is capped at about 28 movements per hour. A recent runway overrun caused havoc at the airport for four days. We need to find some quick fixes to bring capacity at India's largest financial centre to over 40 movements per hour. It is encouraging to hear that efforts to upgrade the airport are being made and that a greenfield airport site is also being seriously considered.

Airspace is another area of concern. Already, congestion around airports is causing severe and chronic delays. These inconvenience travellers, drive up costs and do nothing to demonstrate efficiency to incoming visitors and investors. Again, there are some quick fix technology solutions that could be implemented. For example, if an arrival delay is anticipated even before an aircraft takes off, then why not hold the aircraft on the ground until a touchdown time can be guaranteed? It won't solve the delay problem, but with minimal cost, such a solution will help to mitigate some of the costs of delays.

These problems will become more acute once the new aircraft take to India's skies. As for the solution, quite frankly, the bottom line is cost efficiency. Airlines, airports and air traffic control are partners. Together, we are the gateway for tourism and investment. A cost-efficient welcome for travellers and businessmen will go a long way towards facilitating further sound economic growth.

To gain the full economic benefit of aviation, India needs a common sense approach to taxation. Any taxes or charges that are collected should be transparent and are reinvested in the sector. Measures such as the recently imposed 10.2 per cent service tax fee on landing and airport and air navigation fees reduce India's competitiveness and limit the wider economic benefits that air transport can provide. Policy makers need to understand the long-term impacts of such misguided policies.

Success does not happen by chance. India has done a great job of freeing the commercial forces to create what is one of the most vibrant markets for air services in the world. Now, it is time to take the next step. The challenge is to turn this great start and energy into a long-term policy that harnesses the vast economic impact of efficient air transport. If done well, the positive effects will be felt throughout India's economy for decades to come.

The author is Director General and CEO of IATA