Easing air traffic limits with the UAE isn’t just about convenience—it’s a strategic lever to fuel India’s economy and global integration
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Air connectivity has long been viewed as a logistical necessity, but must now be recognised as a critical enabler of geoeconomic integration and national competitiveness. Liberalised air services constitute a vital component of the 21st-century economic architecture, similar to how physical infrastructure has underpinned the past industrial revolutions. For instance, in the India–United Arab Emirates (UAE context, trade, diaspora ties, and strategic convergence are deepening, and outdated aviation agreements have become a structural bottleneck. Liberalising bilateral air services is not merely about easing passenger traffic; it is an instrument of economic transformation.
Liberalised air services constitute a vital component of the 21st-century economic architecture, similar to how physical infrastructure has underpinned the past industrial revolutions.
Despite surging demand, the India–UAE aviation corridor remains constrained by dated bilateral caps—66,000 weekly seats to Dubai and 50,000 to Abu Dhabi, fixed since 2015. This artificial scarcity leads to inflated fares, limited connectivity, and underutilised trade potential. A strategic recalibration of aviation policy could unlock significant macroeconomic gains.
Air services liberalisation entails dismantling restrictive bilateral quotas and allowing market-driven capacity, frequency, and city-pair access adjustments. This process can be incremental, through annual seat increases, expansion into Tier-2 cities, carrier diversification, or more comprehensive via open skies frameworks. In India's case, the urgency is evident. An Observer Research Foundation study projects that a 1 percent increase in passenger volume can lower average fares by 0.2 percent. Over a five-year horizon, this could translate to a 20 percent fare reduction, generating over US$ 1 billion in aggregate consumer surplus. Such price elasticity is particularly consequential for middle-income households and migrant workers who dominate India–Gulf travel flows.
Liberalisation catalyses employment not just within aviation but across the service economy. Each new flight generates demand for pilots, ground personnel, maintenance technicians, airport operators, and hospitality staff. Significantly, these gains are not geographically confined. If bilateral expansions are synchronised with India's UDAN (Ude Desh ka Aam Nagrik) scheme and regional airport development, job creation can be decentralised and inclusive.
A counterfactual simulation for India suggests that failure to liberalise international aviation in the early 2000s forfeited nearly 12 million potential passengers and 910,000 jobs.
Comparative evidence reinforces this claim. The European Union's (EU) Single Aviation Market generated 1.4 million jobs in a decade. A counterfactual simulation for India suggests that failure to liberalise international aviation in the early 2000s forfeited nearly 12 million potential passengers and 910,000 jobs. These figures offer a scale of the latent economic potential now at stake.
Air connectivity is integral to modern supply chains, especially for high-value, time-sensitive exports. India–UAE bilateral trade stood at US$ 84 billion in 2022–23 and is poised to exceed US$ 100 billion (non-oil trade). However, aviation limits constrain cargo capacity and investor mobility, functioning as de facto non-tariff barriers.
Micro, Small and Medium Enterprises (MSMEs)—India’s largest exporters by volume—stand to benefit significantly from predictable and affordable cargo services. Enhanced connectivity will facilitate Emirati business travel to manufacturing hubs and allow Indian professionals to access Gulf markets more fluidly. The warning signs are already visible: Emirates President Tim Clark has publicly questioned India’s strategic importance given the regulatory inertia, indicating a potential shift in UAE airline focus to more liberal markets.
Air liberalisation would also catalyse bilateral tourism. In 2023, over 2.2 million Indian tourists visited Dubai. Simultaneously, the UAE remains a critical source of medical, religious, and cultural visitors to India. Expanded and diversified flight access can enhance this two-way flow, especially if direct routes from Tier-2 Indian cities to secondary UAE airports are prioritised. Beyond economic value, such people-to-people linkages serve diplomatic and cultural objectives, strengthening India’s soft power projection and diaspora engagement strategies in the Gulf.
Concerns about asymmetric gains favouring Gulf carriers are not unfounded. However, they can be mitigated through phased liberalisation and calibrated safeguards. The ORF study proposes a 5 percent annual increase in seat entitlements and tapping underserved markets. These provisions would enable domestic carriers to ramp up long-haul capacity while leveraging new aircraft acquisitions and proposed Maintenance, Repair, and Overhaul (MRA) hubs under ‘Make in India.’
Moreover, policy tools such as code-sharing, slot swaps, and joint ventures can offset market disadvantages and promote cooperation over competition. Liberalisation, thus, need not imply deregulation—it can be structured, sequenced, and strategically aligned with industrial policy goals.
If India is to position itself as a regional transit hub and logistics leader, it must match infrastructure investments with regulatory agility. Otherwise, the country risks ceding strategic aviation ground to more proactive competitors in Asia and the Gulf.
Air services liberalisation is not an isolated policy intervention. It is deeply intertwined with India's broader geoeconomic trajectory. The India–UAE Comprehensive Economic Partnership Agreement (CEPA) envisions greater trade and investment integration across renewable energy, technology, and finance sectors. Efficient air connectivity is the infrastructure that undergirds such ambitions. If India is to position itself as a regional transit hub and logistics leader, it must match infrastructure investments with regulatory agility. Otherwise, the country risks ceding strategic aviation ground to more proactive competitors in Asia and the Gulf.
Liberalising air services between India and the UAE is not optional, but an essential step in realising India’s ambitions of becoming a US$ 5 trillion economy by 2027–2028 and a global node for mobility. It is a low-cost, high-impact reform that aligns with multiple policy priorities: trade facilitation, employment generation, infrastructure utilisation, and diplomatic connectivity. The imperative now is not ideological but strategic. A calibrated, phased liberalisation pathway—anchored in domestic capacity building and geopolitical foresight—offers India the opportunity to elevate its aviation sector from constraint to catalyst. The need of the hour is to act before the skies close in on opportunity.
Arya Roy Bardhan is a Research Assistant at the Centre for New Economic Diplomacy, Observer Research Foundation.
Debosmita Sarkar is an Associate Fellow at the Centre for New Economic Diplomacy at the Observer Research Foundation.
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Arya Roy Bardhan is a Junior Fellow at the Centre for New Economic Diplomacy, Observer Research Foundation. His research interests lie in the fields of ...
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Debosmita Sarkar was an Associate Fellow with the SDGs and Inclusive Growth programme at the Centre for New Economic Diplomacy at Observer Research Foundation, India. Her ...
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