India to welcome FDI in to local airline industry

India’s airline industry which caters to one of the world’s fastest growing market, has reported significant losses of £1.63 billion during recent years due to the increased fuel prices. Five of the India’s major airlines have reported losses. Mr. Vijay Mallya who owns Kingfisher airlines announced significant losses in his airline which stopped its budget airline service, Kingfisher red in last September saying they no longer intend to compete in low cost airline market since the cost have risen high with the increased fuel prices.

Considering the downturn in the industry the Indian government is considering opening the Indian commercial aviation sector for the foreign direct investors which was blocked before. Last month a group of senior ministers of Indian government had agrees to allow foreign airlines to purchase stakes of Indian  domestic airlines which will enable to raise much needed capital for crashing airlines to survive. Moreover, Amber Dubey the director of aviation of global consultancy firm KMPG has stated that apart from the besides fulfilling the required funds it will also give Indian airlines the access to the international exposure and the managerial expertise from global market leaders.

Further, with the government’s decision to open Indian aviation industry for the foreign direct investments the domestic industry can be benefited in number of different ways. Apart to the managerial expertise the FDIs bring in the sophisticated technologies in to the country which will enable the local competitors the access to obtain overseas resources and technologies. Additionally, FDIs will also bring employment benefits as in more employment opportunities, knowhow and improved skills which will create more job opportunities to the Indian citizens and also increase the employability of existing employees. It will also extend the local capital market as in if the foreign investors reinvest the money they generated in the Indian market the economy will be strengthened with more capital injections.

On the other hand by allowing the foreign companies to enter in to Indians market, adverse effects might be created on the domestic completion in India as a result of the brand strength of the global market leaders. The influences by the foreign companies in to India may affect the decision of the government later on and it will cause a loss of national autonomy in the country. Moreover India been an Asian country with the involvement of western airlines in to the market conflicts may create on the cultural issues and based on the environmental damage.

In my opinion the Indian government has to take more in depth evaluation of the positive and negative consequences of taking off the barriers to FDIs to enter in to the market. Can’t the domestic airlines survive without the international funding? If the fuel cost is the major issue behind the losses they made, why can’t the Indian government get involved in controlling the fuel prices in more effective way particularly beneficial to the airlines?