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Air Cargo Middle East & India reviews two conflicting arguments about India's airfreight future.

No observer of the international aviation scene will have failed to notice the travails that India suffered in 2008. Dropping capacity and the fluctuations in the price of jet fuel left most regions in difficulties, but confusion in the subcontinent reigned supreme in October, as former enemies Jet Airways and Kingfisher joined forces to try and stave off the global downturn.

But what of the cargo industry? Perhaps the most revealing fact about India is that only 1% of its freight is carried by air, as opposed to the global average of 2%.

Add that to the fact that we are talking about a country of 1.1 billion people - about 17% of the world's total - and it's clear that the raw materials are in place for a logistics revolution that will have the power to compete with anything else on the planet. India is the largest sub-market in south-west Asia, comprising 63% of international flows in the region, and since 1997, the airfreight market in the subcontinent has averaged 9.5% annual growth.

Furthermore, India's size is a contributing factor to the future requirements for a strong air cargo network. The country's expanse and the fractured nature of its road transport system should lend a hand to airfreight operators, as will the emerging middle class and the expanding consumption base.

However, there are a number of drags that the industry needs to eliminate before it can even start thinking in those terms, and it will be a long process before India's infrastructure can match that seen elsewhere. Difficult economic conditions will also hamper growth in this area, and Merrill Lynch expects GDP growth in Asia (excluding Japan) to grow by 7.7% this year, the slowest pace since 2009.

Indian express cargo companies experienced a 5-10% decline in business in the first quarter of the current financial year as inflation and a slowdown in industrial problems have taken their toll. "Transport infrastructure, government policies and a lack of understanding of supply chains are major obstacles to growth in India's express market," says Ketan Kulkarni, head of marketing, corporate communications and sustainability for Blue Dart Express.

"Moreover, the logistics industry has over the years faced a few challenges, such as central and state tax, local levies licences, registrations and paperwork for infrastructure development. Factors such as congestion, over-regulation and a weak transport network are also seriously holding back the sector."

The facts look grim, but are India's operators daunted? While 2008 saw a litter of promised cargo start-ups, most of whom subsequently delayed the start of operations due to the economic conditions, 2009 will undoubtedly also be tough.

But some carriers will be braving the market. One such operator is Deccan Express Logistics, headed by charismatic entrepreneur Capt G R Gopinath, founder of successful low-cost carrier Deccan Air. "India is not in a recession, but it does need investment in logistics to keep pace with its growth," says Vijaya Menon, head of corporate communications for Deccan Express Logistics.

Even in a recessionary economy, it is necessary for organisations to rethink their costs and optimise their supply chain and spends. We therefore think that this is lucrative time for Deccan to set up operations, as logistics is the lifeblood of any trade system."

But all operators stress that India's infrastructure is its biggest obstacle to growth, and there are a list of issues that the national and state governments need to address if the air cargo sector is to achieve its potential.

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