The civil aviation sector in India is growing at a phenomenal pace and has become a major contributor to the country's economy. This is discernible from the fact that Indian airports handled 60 million passengers and 1.3 million tonnes of cargo in 2004-05 with a growth rate of 22 per cent and 21.6 per cent respectively. Furthermore, passenger traffic is projected to grow at a CAGR of over 15 per cent in the next three years, expecting to cross 100 million by 2010. On the other hand, cargo traffic is expected to grow at over 20 per cent per year over the next three years crossing 3.3 million tonnes by 2010.
During the last few years, there have been significant policy changes in the sector such as the introduction of 'open sky policy' and the entry of low-cost airlines, which has brought air travel within the reach of the middle class travellers and given a whole new meaning to the aviation sector. Having said that, it is clearly evident, in the last decade, air traffic has grown beyond capacity.
In India, for a long time, metros like Delhi, Mumbai, Bangalore, Kolkata etc., have flourished and emerged as the nerve centres for all major economic and commercial activities. Poor air connectivity at tier-I and tier-II cities has made these areas inaccessible and resultantly reduced the interest levels amongst prospective investors. Such a situation has lead to an unbalanced growth of the economy.
However, in the current scenario, with the urban population in the metros exceeding beyond permissible limits, it is the tier I and II cities that need to prepare for the future. The aviation industry, which was limited to the metropolitan areas, has now spread its wings to the smaller cities, as there is vast potential lying untapped in category II and category III cities. We have about 300-million strong middle-class population that forms the demand base for aviation services.
Though the government has taken several initiatives in alliance with the private sector for capacity augmentation at airports such as modernization and upgradation of existing airports and development of new greenfield airports, there is a huge gap that exists in the implementation of projects. While modernisation of airports in the metros has evinced interest amongst a host of private companies, the non-metro airports and greenfield projects are lagging behind owing to the commercial viability of these projects.

Viable model
In such a scenario, what emerges as an interesting and viable model for development of airports is the aerotropolis. The term 'aerotropolis' means 'Airport City' and has been popularised by American academician Dr. John Kasarda. It is a city in which the layout, infrastructure and the economy are centered around a major airport. In its simplest form, the aerotropolis is an economic hub that extends from a large airport into an adjoining area that consists mostly of distribution centres, office buildings, light manufacturing firms, convention centres, and hotels, all linked to the airport via roads, expressways (aerolinks), and rail lines (aerotrains). These aerotropolis are powerful engines for promoting local economic development and are a good source for procuring foreign investments.
Unlike conventional airports, an aerotropolis leads to a parallel growth of other prominent sectors like real estate, hospitality, manufacturing industries etc. This becomes possible as these sectors get a lot of exposure in terms of investments, business opportunities etc. Over the years, aerotropoli have come up in a big way in different corners of the world. The most developed examples of aerotropoli are to be found in the rising economies of Asia and Middle East - and typically in city-states such as Hong Kong, Singapore, and Dubai. They have gained immense popularity for the fact that in addition to their traditional services, major airports have developed significant non-aeronautical commercial facilities, services and revenues.
The concept of aerotropolis or airport city, though at a nascent stage, is fast catching up in India. This is because it serves as a viable investment option as compared to stand alone airports. In an aerotropolis, a major share of revenue comes from non-aeronautical components such as real estate, hospitality, tourism which yield faster returns than the aeronautical components. In such a scenario, even though the aeronautical part has a long gestation period, the financial standing of the company is not affected due to returns from the allied/non-aeronautical developments.

Challenges
There are factors that are slowing down the development of aerotropoli. Factors like getting clearances from the government and land acquisition could be possible hindrances that can slowdown the process of setting up of aerotropoli. However, the announ-cement of the new greenfield airport policy is expected to make the process a bit faster.
Financing of airport infrastructure has some inherent problems. These projects have a large element of sunk cost, a very long gestation period and highly uncertain returns on investment based on several assumptions of traffic growth that may fail to materialise. The current pattern of financing is predominantly based on internal resources of Airports Authority of India. Funding through external assistance, external commercial borrowings, loans and equity has been negligible. The allocation of budgetary grants is limited to certain airports in remote and inaccessible areas. Considering the astronomical sums which seem to be required for modernisation and upgradation of existing airports and for the new airports, there has to be a clear privatisation of projects so as to utilise state resources in the most optimal manner. Further, the financing mechanisms will have to be looked at from a thoroughly novel standpoint.

Outlook
The Indian aviation industry is on the verge of metamorphosis and it is now inevitable to stop it from growing and flourishing across all borders. There is a great potential to be tapped in the industry as the projected growth in the domestic passenger is about 6 per cent and so there is an urgent need of aviation infrastructure in near future. Airports are such vital centres of growth and development that they have become as important to a region as a city's core business region.
After decades of haphazard development around old airports, new airports such as the one at the Durgapur Aerotropolis are being built with the goal of creating more than an airport. In the near future, tier-I and tier-II cities can benefit a great deal from the setting up of aerotropoli, as these will bring in passengers and will lead to a rise in cargo movements. All these will bring in facilities required to support the aeronautical infrastructure that will further create a demand for the housing and hospitality sectors. With the gradual shift towards services and change in the nature of airport business towards non-aeronautical revenues, the idea of developing aerotropolis could be one of the best alternatives in the economy.