'India may be among top three aviation markets by 2020'

"Indian civil aviation sector has continued to experience high passenger growth, and if the trend continues it could rank among the top three aviation markets in the world by 2020," it said in the report titled 'Indian Aviation:Spreading its Wings'.

Domestic traffic in India saw a Compounded Annual Growth Rate (CAGR) of 17 per cent between 2009 and 2011. "A strong market growth rate coupled with infrastructure expansion will help the sector back on its feet as the economy recovers," it said.

The report also said this would be a good time for global players to enter India and explore the potential of a large underserved market. "However, volatility in fuel prices combined with the highest tax on aviation turbine fuel and other national policy related issues continue to challenge the sector's growth," he said.

The recent increase of FDI up to 49 per cent 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 26 per cent cap on FDI in defence as it has failed to attract foreign investment.

India has received only USD four million in the 10 years since FDI was allowed in the defence sector, while the entire economy has received over USD 180 billion during the period.