49% FDI cap in civil aviation not attractive: FICCI-PwC

India is slated to be amongst top 3 civil aviation markets by 2020, the report said

A FICCI-PwC report  has said relaxation of FDI norms in civil aviation   will not result in substantial increase in investment in the sector. The report released today states that India is poised to be amongst the top three civil aviation markets by 2020 based on current growth trends.

"However, volatility in fuel prices combined with highest tax on aviation turbine fuel and other national policy related issues continue to challenge the sector’s growth. The recent increase of FDI up to 49% in civil aviation might also not result in substantial increase in investment since it has been imposed on the aggregate of FDI and FII. The report also recommends a hike of the 26% cap on FDI in defence as it has failed to attract foreign investment. India has received only $4 million in the 10 years since FDI was allowed in the defence sector, while the entire economy has received over $180 billion,'' the report has said.

The report has been jointly prepared by PricewaterhouseCoopers and Federation of Indian Chambers of Commerce and Industry.

Dhiraj Mathur, Leader - Aerospace & Defence, PwC India said “The proactive policy regime created by the government has begun to bear fruit. We see the green shoots of the development of an indigenous aerospace and defence industry. In the last five years there have been significant investments by large and small domestic companies that has entered this industry.

However, the FDI inflow has been very low at about $4 million. The government needs to review the 26% cap on FDI as well as streamline the various polices to promote greater investment. India’s acquisition programme and its offset policy can potentially generate investments in excess of $20 billion  along with creating massive employment for skilled and professional manpower. The government should strive to make Indian industry an integral part of the global aerospace and defence supply chain.”