On February 13, Air India announced that it was planning to purchase 470 passenger aircrafts from the two global giants, French Airbus and American Boeing. While all three companies involved in the deal are private corporations, the importance of it became clear when Prime Minister Narendra Modi spoke with French President Emmanuel Macron and US President Joseph Biden after the announcement of the deal. Even British Prime Minister Rishi Sunak praised the deal. A statement from the British high commission said the deal is worth billions of pounds to the UK as a “significant portion of the manufacturing process for the new aircraft is expected to take place in the UK,” HT reported.
How important is the Air India-Boeing-Airbus deal for India’s trade relations with these three countries? Here are four charts that explain this in detail.
The deal is worth more than all of French, British and US exports to India in 2021
Given the magnitude of the deal, it is difficult to put an exact value that Boeing and Airbus will be receiving for these aircraft. A Reuters story published on February 11 said that the total value could be “worth more than $100 billion at list prices” (https://reut.rs/3lHhWTF).
Even if the actual value is $ 10 billion lower than this ballpark estimate, it will be almost double the value of exports from Britain, France and US in India in 2021, which stood at $53billion (although the deal is a multi-year one). This statistic underlines the commercial importance of the deal for these three economies. To be sure, the deal is significantly more important for the two European countries given the fact that US imports to India are much larger than that of Britain and France.
…And it could provide a significant boost to the aviation industry in these countries
HT has analysed United Nations COMTRADE database to look at exports from the aviation industry in France, Britain and US. Using the HS code 88 – it refers to “aircraft, space crafts and parts thereof” – it is possible to look at the magnitude of aircraft exports from these countries. These numbers also include the value of military aircraft sales from these countries and not just civilian aircraft . The export numbers in the past few years are significantly lower than the value of the Air India order, which once again, underlines the importance of this deal for aircraft manufacturers in these countries.
To be sure, India’s overall importance in the export markets of such economies is not very large
While there is no denying the importance of the Air India deal for countries such as Britain, France and US, it needs to be seen in the larger context of India’s overall importance in merchandise trade of these economies. Data from the World Bank’s WITS database shows that India’s overall share in the export of these economies was still insignificant. To be sure, these low shares are more a reflection of India’s overall low share in global trade than anything else. India also has a small share in overall exports from China, which exports more than what Britain, France and US together export to India.
Is there something for India in the deal?
If one were to look the aviation exports of all the countries, only a handful of countries dominate most of its production and therefore the associated technologies are concentrated within them. UN COMTRADE data shows that 64% of the total aviation exports in 2021 came from five advanced nations, namely, France, United Kingdom, Canada, USA and Germany. In fact, France and Germany together accounted for 40%. However, like most technologically advanced industries, there are downstream linkages for the aircraft industry as well and India does host some facilities of the global airline giants. These activities are likely to get a stimulus with the deal, apart from the obvious possibility of Air India taking away business of foreign airlines. Of course, it will be an icing on the cake if the government and Air India work together to ensure that the biggest ever aircraft deal also leads to some technology transfer to the Indian aviation industry.
