NEW DELHI - India’s civil aviation suppliers market, including components and maintenance, is seen growing annually at 16.1 percent over the next five years to top $3.89 billion, says a new research by a global consultancy.

‘Low manufacturing and labour costs are expected to boost outsourcing to India. Labour costs in India are relatively lower compared to the western countries,’ says the Frost and Sullivan study, listing the reasons for the projection.

‘India also enjoys a geographical advantage over other countries that enables it to cater to the demands of countries in South Asia as well as the Middle East. The offsets policy of the government can help India attract significant investment.’

The three segments covered in the research, namely component suppliers, design suppliers, and maintenance, repair and overhaul operations, earned revenues to the tune of $1.36 billion in 2007, says the study.

‘The recent opening of the market to private participation and India’s ability to attract foreign direct investment has been the main driver in the market expansion,’ says Frost and Sullivan financial analyst R. Madusudanan.

‘Indian participants can leverage on the advantages of lower labour costs and strategic location to make India an export hub.’

Statistics available with India’s aviation regulator says there are over 1,400 aircraft and helicopters in the non-military space, including those owned by scheduled carriers and private companies.

The study says the major restraint for market participants is competition from Southeast Asia and the Middle East. Inconsistent order flow, longer gestation and the lack of technical know-how also act as challenges.

India should build sufficient excess capacity to cater to the demands. Athough gestation periods for the projects tend to be longer, the returns are usually high - in the band of between 15-20 percent, says the study.

‘Local participants lack the technical expertise to execute complex tasks on their own,’ says Madusudanan. ‘Therefore, joint ventures with foreign participants will enable local firms to more effectively confront challenges, by ensuring the transfer of technology.’