Did India's 2026 Budget Miss Key Aviation Financing Reform Amid Fleet Boom?

The Union Budget 2026-2027, presented by Finance Minister Nirmala Sitharaman, has drawn sharp criticism from the political opposition, which claims it is blind to India’s real economic crises. Congress leader Rahul Gandhi alleged the budget ignored falling manufacturing, youth unemployment, and farmers’ distress. Congress President Mallikarjun Kharge specifically questioned the lack of a manufacturing revival strategy and progress on infrastructure.

Aviation Sector's Unmet Expectations

For the commercial aviation sector, the budget was seen as a mixed bag, failing to deliver on a key industry demand. Prior to the presentation, the industry had strongly pushed for granting "infrastructure status" to aircraft. This classification would allow airlines to access loans at lower interest rates.

It would also open access to the Reserve Bank of India’s Priority Sector Lending (PSL) framework. Such a reform is critical for new and smaller operators to secure financing. The lack of this structural reform in the Union Budget 2026-2027 is viewed as a missed opportunity to significantly ease airline funding costs.

Targeted Customs Duty Relief

Despite the absence of the infrastructure status, the budget did offer targeted relief aimed at bolstering the domestic aviation ecosystem. The government proposed to exempt basic customs duty on components and parts required for manufacturing civilian and training aircraft. This move directly supports the government’s Make in India aviation initiative.

Furthermore, the customs duty on raw materials imported for Maintenance, Repair, and Overhaul (MRO) requirements was also exempted. This measure aims to reduce operational costs for MRO units and enhance India’s competitiveness in the regional MRO market.

The Paradox of Growth and Policy

The political criticism regarding a lacklustre budget contrasts sharply with the massive growth projected for Indian airline fleets. Global manufacturers are forecasting unprecedented expansion.

• Airbus projects India's commercial fleet will triple to 2,250 aircraft over the next decade.
• This growth positions India as the world’s third-largest civil aviation market by 2035.
• Rival Boeing forecasts the region will need nearly 3,300 new aircraft by 2044.

Indian carriers, including IndiGo and Air India, currently have over 1,700 aircraft on firm order. This huge order book underscores the urgent need for robust domestic financing and infrastructure.

Workforce and MRO Challenges

This rapid expansion necessitates a corresponding increase in the technical workforce. Airbus estimates the technical workforce must grow from 11,000 to 34,000 by 2035 to maintain the scaled-up fleet. While the customs duty cuts support MRO, the broader financial framework remains a challenge.

Industry experts note that without the aircraft infrastructure status, airlines must rely heavily on global leasing markets. This reliance can lead to higher long-term costs and significant foreign exchange outflows. The Directorate General of Civil Aviation (DGCA) will need to ensure regulatory frameworks keep pace with this fleet growth.

In summary, while the budget provided a boost to the domestic manufacturing and MRO segments, the opposition’s broader critique of a lack of structural reform resonates in the commercial aviation financing space. The sector’s ambitious growth trajectory, backed by manufacturers like Airbus, requires more comprehensive financial policy support to truly capitalize on its potential.

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