Union Budget 2026 expectations: How next phase of India’s aviation growth can be ensured

Budget’s focus on the aviation sector could be a defining moment for shaping a future-ready, inclusive, and sustainable aviation ecosystem. (AI image)

By Manish Sharma and Sahil MahajanIndia’s aviation sector is approaching a critical inflection point. In FY25, Indian airports collectively offered handling capacity of about 500-515 million passengers per annum (MPPA), against the actual traffic of 414 million passengers. By FY26, this capacity is expected to increase further to nearly 550 MPPA with additional capacity from new airports such as Jewar, Navi Mumbai and Bhogapuram, while air traffic is expected to reach 460 million passengers. Looking ahead, in FY30 the adequate capacity of about 775 – 825 MPPA would be required to cater to the anticipated traffic of 630-650 million passengers, highlighting the need for timely, well-directed investments and policy support to stay ahead of demand and prevent future capacity bottlenecks. If aligned with the government’s Viksit Bharat @2047 vision, the upcoming Union Budget’s focus on the aviation sector could be a defining moment for shaping a future-ready, inclusive, and sustainable aviation ecosystem.Developing world-class aviation infrastructure and enhancing regional connectivityThe focus of this year’s budget allocation for the aviation sector should be on developing world-class aviation infrastructure through a renewed push for public-private partnerships (PPP), and expanding the current portfolio of PPP airports from 14 to additional 25 airports in the next three to four years aligned with the National Monetisation Pipeline (NMP) initiative. This must be complemented by continued modernisation of existing airports and development of new metropolitan and regional hubs. With cargo volumes projected to nearly triple to about 10 million metric tonnes (MMT) by 2030, another priority area is the strengthening of air cargo infrastructure. This will require sustained investment in airport upgrades, including dedicated cargo handling zones and express cargo facilities at major hubs as well as upcoming airports such as Navi Mumbai, Jewar and Bhogapuram, so that logistics capacity can keep pace with passenger infrastructure. Additionally, aligning air freight expansion with the PM Gati Shakti initiative will be essential to enhance rail-road-air connectivity, optimise shared assets across multimodal hubs, and enable seamless door-to-door delivery of goods nationwide.Developing inclusive and balanced regional connectivity remains another important areas for the development of the aviation sector. For this, strengthening the Ude Desh ka Aam Naagrik (UDAN) scheme, with focused interventions for hilly terrains, remote areas and the Northeast will be essential to ensure affordable, reliable air connectivity and balanced regional development.Enabling a competitive and self-reliant aviation ecosystemTo enhance competitiveness within the aviation sector, the Budget should prioritise rationalisation of aviation turbine fuel (ATF) taxation through a calibrated roadmap to progressively bring ATF under the Goods and Services Tax framework, while incentivising states to moderate Value Added Tax (VAT) on ATF.Building an ‘Atmanirbhar’ aviation ecosystem will require reinforcing GIFT City as a global hub for aircraft leasing and financing, and scaling up domestic maintenance, repair and overhaul (MRO) and aerospace manufacturing capabilities. This can reduce outflow of foreign exchange, deepen the domestic value chain and create high-skilled jobs.Green, global and digital aviation growthThe Budget could help position India as a global aviation leader by supporting modernisation of bilateral air service agreements and developing select airports as globally competitive transit hubs, backed by efficient airside infrastructure and superior passenger services.Sustainability should also be a key focus area for the sector by prioritising initiatives which promote sustainable aviation fuels (SAF), develop carbon-neutral airports, and encourage the adoption of energy-efficient and environmentally responsible technologies.Finally, the development of a digital and passenger-centric aviation ecosystem will be key for driving the next phase of growth, efficiency, and competitiveness of India’s aviation sector. Expansion of DigiYatra, deployment of AI-enabled air traffic management systems, and the transition to end-to-end paperless processes can significantly enhance efficiency, safety, and passenger experience.By aligning infrastructure expansion, fiscal reforms, sustainability, self-reliance and digitisation, the Union Budget can catalyse India’s aviation sector as a powerful enabler of inclusive economic growth, global connectivity, and the Viksit Bharat ambition.(Manish Sharma is Partner and Leader Infrastructure, Transport and Logistics – PwC India. Sahil Mahajan is Partner – Aviation, Airports and Hospitality- PwC India)