The Hindu Business Line : Cargo market on the move

Though the world cargo industry cannot survive in isolation and will need a firm backing from efficient rail and road networks, chances are that its importance is going to increase exponentially in the next two decades.

According to the World Air Cargo Forecast-2006-2007 report, the market from India and its neighbouring countries constituted approximately 3.9 per cent of the world’s air cargo traffic in tonnage and 4.2 per cent in tonne-kilometres in 2005. Total international air cargo flows moving into, within, and out of the region now exceed 1.4 million tonnes annually.

The report suggests that Europe is the region’s primary air trade partner. It accounts for 33 per cent of all foreign air trade being carried in and out of the region. West Asia (23 per cent), Asia (22 per cent) and North America (18 per cent) are other significant regions for the air cargo industry.

As per the study, India is the leading international freight market in the subcontinent, which also comprises Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal, Pakistan and Sri Lanka.

Of the total 1.4 million tonnes of international cargo that flew in and out of the region, India moved the maximum with about 8.82 lakh tonnes. The other two important markets in the region were Pakistan with about 2.07 lakh tonnes and Sri Lanka with 1.6 lakh tonnes.

Growth factors for India

Apart from being the largest international air trade hub, India has the potential to develop as a large domestic air freight market as well. As per the report, the country’s domestic market was estimated to total 2.65 lakh tonnes in the year 2005. Since 1995, the domestic market has expanded at an average annual growth rate of 12.5 per cent.

Among the factors that would foster growth in India’s domestic air cargo would be its vast geographic expanse, large population and potential for consolidation in its current fragmented transport sector, especially trucking industry. Pakistan is the only other country with a sizeable domestic air freight market in the region. Its domestic air freight flows stood at approximately 40,000 tonnes in 2005.

Looking at the commodities being traded through air, textile and garments are the prime air exports of the subcontinent. Other nascent yet increasing air export categories for the region include pharmaceuticals and automobile parts. The Indian subcontinent’s imports are led by small packages, capital equipment and technology goods.

With the substantial growth of business process outsourcing in India since 2000, demand for the air importation of computers and telecommunication equipment has gone up tremendously.

Another interesting trend that the report points out is that though Europe is the region’s leading international market, there is an imbalance. The Indian subcontinent’s air exports outweigh air imports by 1.8 to 1 in total tonnage. While the region’s imports from Europe are led by power generating machinery, miscellaneous manufactured articles, general industry machinery, electrical machinery and telecommunication equipment, air exports to Europe are apparel, vegetables, fruit, fish, textiles and miscellaneous manufacturing articles.

The disparity seems much more acute between the subcontinent and North America markets, with the region’s air exports outweighing air imports by about 3 to 1 in overall tonnage.

Looking ahead

Going forward, the report suggests that air imports from Europe (only Europe is taken into consideration, it being the largest air trade partner) to the subcontinent will average 6.6 per cent growth per year, growing from around two lakh tonnes in 2005 to six lakh tonnes by 2025. However, the assumption is based on expectations that “there would be continuing expansion of the BPO sector, further privatisation of India’s industry rapprochement between India and Pakistan, a resumption of the peace process in Sri Lanka and ongoing aid and reconstruction assistance to Afghanistan.”

Exports between the two regions would continue to expand approximately 6 per cent annually till 2025. In 2005, they stood at around four lakh tonnes and are likely to touch nine lakh tonnes by 2025. Diversification into other light industries, apart from textiles and garments would be fruitful for this trade lane, the report adds. Foreign Direct Investment also has stimulated international air trade in the region. This growth coincides with a jump in air cargo traffic with North America and Asia.

(The report has been published by Boeing, leading aircraft manufacturer, with the Indian subcontinent data available from IATA, ICAO, European government and airport statistics, the United Nations, and the US Department of Commerce.)