India's Aviation Regulator Seeks Enhanced Powers: A Catalyst for Long-Term Growth and Global Competitiveness

India's aviation sector is undergoing a transformative phase, driven by regulatory overhauls and financial reforms aimed at positioning the country as a global aviation hub. The Directorate General of Civil Aviation (DGCA) has introduced a series of measures, including relaxed wet leasing rules and the implementation of the Protection of Interests in Aircraft Objects Act, 2025, which aligns India with the Cape Town Convention. These changes are not merely administrative tweaks but foundational shifts designed to enhance operational efficiency, reduce financing costs, and attract foreign investment. For investors, the implications are clear: a sector poised for long-term growth, supported by regulatory frameworks that mirror global best practices.

Regulatory Reforms and Market Confidence

The DGCA's recent easing of wet leasing restrictions-replacing the term "only" with "normally" in emergency provisions-addresses a critical bottleneck for airlines struggling with capacity constraints, according to a Reuters report. This flexibility allows carriers like IndiGo and Akasa Air to scale operations without relying solely on larger aircraft, which remain scarce. According to the Reuters analysis, this shift could unlock significant operational efficiency, particularly for low-cost carriers (LCCs) that thrive on cost optimization.

However, the most impactful reform is the Protection of Interests in Aircraft Objects Act, 2025. By integrating the Cape Town Convention into Indian law, the act provides a legal framework for aircraft repossession, deregistration, and asset recovery, as reported by the Economic Times. This reduces leasing costs by 8–10% for airlines, as highlighted by the Economic Times, and grants secured creditors the right to repossess aircraft within five working days of a default. Such clarity is critical for attracting global lessors, who previously hesitated due to India's opaque insolvency processes. The GIFT International Financial Service Centre (IFSC) further amplifies this effect by offering access to global capital markets and tax incentives, enabling airlines to procure aircraft at competitive rates, according to KPMG.

Global Benchmarks and Comparative Insights

India's reforms echo successful global models. The Cape Town Convention, ratified by 60 countries, has historically reduced aircraft leasing costs by up to 15% in markets like the UAE and Singapore, according to a ResearchGate paper. For instance, the UAE's adoption of the convention in 2006 streamlined asset recovery, making it a regional leasing hub. Similarly, the Federal Aviation Administration (FAA) and European Union Aviation Safety Agency (EASA) have strengthened market confidence through collaborative rulemaking. For example, an EASA-FAA pact in 2024 harmonized safety standards for sustainable aviation fuels (SAFs), reducing compliance costs for cross-border operators.

India's DGCA, however, faces unique challenges. Unlike the FAA's structured Safety Management Systems (SMS) or EASA's mandatory compliance frameworks, India's regulatory enforcement remains fragmented. A 2025 Sassofia study notes that India's DGCA lacks the autonomy and resources of its global counterparts, risking delays in implementation. Yet, the recent overhaul of dangerous goods regulations-aligning with IATA and ICAO standards-demonstrates a commitment to modernization, as reported by VisaVerge.

Long-Term Infrastructure and Investment Potential

The government's focus on infrastructure expansion complements these regulatory strides. With only 149 airports for 1.4 billion people, India plans to build new airports and upgrade existing ones to handle 480 million passengers by 2036, according to the Economic Times. The GIFT IFSC's role in facilitating aircraft leasing and MRO (Maintenance, Repair, and Overhaul) services further underscores this vision. By incentivizing domestic MRO development, the government aims to reduce reliance on costly foreign services, a move that could cut operational costs by 20%, as noted by the Economic Times.

For investors, the synergy between regulatory reforms and infrastructure growth is compelling. The aviation sector is projected to become the third-largest globally by 2030, driven by rising middle-class demand and regional connectivity initiatives, according to a Reuters article. Airlines like SpiceJet, which recently settled millions in lessor dues, stand to benefit from the new legal framework, enabling them to reutilize grounded aircraft and expand fleets (reported earlier by the Economic Times).

Challenges and Mitigation Strategies

Despite these positives, risks persist. Critics argue that the Protection of Interests in Aircraft Objects Act may favor foreign creditors over domestic stakeholders, echoing concerns raised during the GoFirst insolvency crisis, as noted by Vajiram. Additionally, India's complex tax system and fragmented insolvency laws could hinder seamless implementation. To mitigate these, the government must prioritize regulatory coordination between the DGCA, customs, and judiciary, as well as simplify tax structures for aviation finance.

Conclusion

India's aviation regulator is laying the groundwork for a sector that balances safety, efficiency, and investor confidence. By adopting global standards like the Cape Town Convention and aligning with FAA/EASA practices, the DGCA is addressing historical inefficiencies while attracting capital. For long-term investors, the combination of regulatory clarity, infrastructure expansion, and cost reductions presents a compelling case. However, success hinges on overcoming implementation challenges and ensuring equitable treatment of domestic and foreign stakeholders. As the sector evolves, India's aviation market could emerge as a model for emerging economies seeking to integrate into the global aviation ecosystem.