National Civil Aviation Policy 2015: Introduction

This section looks at one claim behind the policy: that India had a middle class of 300 million people who could afford air travel.

What the Ministry believed

The Ministry of Civil Aviation said India could become one of the top three nations in the world for domestic and international passenger traffic. It based this on a 300 million strong middle class and a fast growing economy. The Ministry also admitted that the sector had not grown as it should have, and that India ranked 10th in the world.

How big was the real middle class?

One reason aviation had not taken off may have been the size of the middle class that could actually pay for a ticket.

A report by the National Council for Applied Economic Research (NCAER), through its Centre for Macro Consumer Research, said India would have 267 million middle class people by 2015-16. It defined middle class as families earning INR 340,000 to 1,700,000 a year at 2009-10 prices. It forecast the middle class at 20.3% of the population by 2015-16 and 37.2% by 2025-26. The Economic Times reported these figures.

An article in The Hindu from April 2014, later reproduced by NCAER, used a much lower bar. It defined middle class as households earning more than INR 88,800 a year. It also quoted NCAER as saying that only 40% of this middle class had piped water, only 15% got three hours of water supply a day, just over half had flush toilets, and about half had 18 hours of electricity a day.

The same article said the richest 20% of the population, about 244 million people, earned more than INR 150,000 a year, which is INR 12,500 a month. By standard international definitions, such as spending more than US$10 a day (about INR 650 at the November 2015 exchange rate), India would have no middle class at all, because anyone spending that much was already in the top 5% of the country. INR 650 a day works out to INR 19,500 a month.

The PEW Research Center, in July 2015, published figures based on 2011 data from the World Bank PovcalNet database and the Luxembourg Income Study database. It found that only 2.6% of Indians were "middle income", defined as living on US$10.01 to 20 a day, or INR 19,500 to 39,000 a month. Middle income, upper middle income and high income groups together made up just 3.3% of the population.

Passengers against population

India flew 59.8 million domestic passengers in 2011, which was 5% of the 1,221 million population that year. Domestic and international passengers together came to 5.7% of the population. These counts include foreigners and cannot remove repeat trips by the same person.

KPMG, in a report titled "Indian Banking: The engine for sustaining India's growth agenda" dated 18 May 2013, still relied on the 2001 Economic Times article. KPMG also wrote aviation reports that the Ministry may have used.

Our view

We believed the real group that could afford to fly was much smaller, around 60 million people. That number was close to the total domestic passengers carried in calendar year 2014. We left it to the reader to decide whether a 300 million strong flying middle class was a myth or a reality.

The next section looked at the growth rate needed to reach 300 million domestic passengers in calendar year 2021.