A tale of two sectors: Aviation soars while railways crawl

As many as 101 million people took domestic flights from last April to November, an ascent that will take this fiscal year’s count past 150 million to surpass the 141.6 million recorded in 2019-20.
As many as 101 million people took domestic flights from last April to November, an ascent that will take this fiscal year’s count past 150 million to surpass the 141.6 million recorded in 2019-20.

Summary

  • There’s a boom in aviation fuelled by holiday demand amid a post-pandemic roar back to the skies. But this should not overshadow India’s lumbering recovery in railway traffic.

In the soaring air-fares encountered by would-be holidayers this summer, both demand and supply factors can be seen at play. Seat availability is held back not just by snarls left by covid in global aviation support systems and slow aircraft delivery by plane-makers, but also by domestic dynamics. Airport capacity, as in Mumbai, is under strain. With Indian skies under a near duopoly, we cannot count on rivalry to restrain fares from rising sharply in response to an upsurge in flying. This flier boom also appears to have an unusual blend of fuels, both springing from consumer behaviour. Easily identifiable is ‘revenge travel,’ an attempt at getting even with the pandemic lock-in. This impulse may well have merged with the ‘Yolo mindset’: You Only Live Once. The motive here, too, is to live it up. Taking a more expansive view, an echo of the West’s ‘Roaring 20s’ (after the Spanish flu a century ago) may be upon us, a wave of relief exuberance that should boost the ‘experience economy.’ A less visible contributor to the urge to fly off on holiday, though, might be what’s known as the ‘wealth effect.’ While anecdotes are all we have to back this, the satisfaction of an enlarged stock portfolio can cue a splurge on a getaway, even as market indices suggest that sizeable gains have been made in recent times, and that too, on a robustly expanded base of equity ownership. That India’s local market for civil aviation is about to regain its peak size in 2023-24, thus, is not a surprise.

India’s airline industry is expected to mark a full recovery from covid as it closes a record year. As many as 101 million people took domestic flights from last April to November, an ascent that will take this fiscal year’s count past 150 million to surpass the 141.6 million recorded in 2019-20. What supports the notion of the wealth effect acting as a significant creator of discretionary demand for big-ticket purchases is the recent burst of interest in share ownership. Demat accounts more than trebled over the covid period, even as mutual funds drew large inflows. The trouble with the hypothesis of asset-earned holidays is that it’s unclear if we have had a wide enough dispersal of sizeable gains. Retail investors with shares worth over 1 crore, for example, can possibly envision dividends (and/or notional capital gains) paying for a family holiday, but it is hard to picture new investors in the same league. As beginners, their holdings are probably modest and their reliance on shares to fund lifestyle needs is low. And the limits of an all-India upswell in vacations are exposed by other data on inter-city traffic. For every air traveller, we have 20 railway passengers on non-suburban trains. By current projections, Indian Railways can expect to carry 2,940 million travellers in 2023-24, a figure that’s more than last year’s total but still starkly below (by several hundred million) its pre-pandemic high. This slow revival offers a reality check on how our multitudes are faring.

There are ample signs that India’s experience economy is in for an upper-end bonanza driven by a large consumer cohort with a favourably inclined psychographic profile. Aviation will surely make the most of it. But our lumbering railway recovery evokes one of Premchand’s classic short stories in Hindi. Titled Nasha, or intoxication, it’s about the high of travelling on a fancy ticket for the first time and a sudden descent to reality. That shifting shadow over the fields out there isn’t an overhead plane. In the context of our economy’s current shape, it looks more like a ‘K.’

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