Answer to Question #291889 in Macroeconomics for ifty

Question

(d) Explain two reasons why a government may privatise an industry. [4] 

(e) Analyse how a successful airline industry can promote economic growth. [6] (f) Discuss whether the Indian government should increase the tax on airline fuel. [7] 

(g) Discuss whether more people will apply to be pilots for Indian airlines in the future. [7] 

Answer 1

(d) Explain two reasons why a government may privatize an industry. [4]

1. To increase efficiency: One of the key arguments for privatization is that private enterprises have a profit motivation to reduce costs and increase efficiency. Managers who work for a government-run business normally do not get a share of the earnings. A private company, on the other hand, is motivated by profit, so it is more likely to minimize expenses and improve efficiency.

2. To decrease political interference: Governments are said to be lousy economic managers. Political influences drive them rather than smart economic and business judgment. A state-owned firm, for instance, may hire large numbers of workers, which is unproductive. Due to the obvious unfavorable publicity associated with employment losses, the government may be hesitant to fire the employees. As a result, state-owned firms frequently employ an excessive number of personnel, resulting in inefficiencies.

(e) Analyse how a successful airline industry can promote economic growth.

Aviation provides the only fast global transportation network, making it critical for international trade. It promotes economic growth, job creation, and global trade and tourism. Tourism is one of the industries that heavily rely on aircraft. Air travel contributes to economic growth and poverty alleviation by promoting tourism.

Air transport also facilitates worldwide trade and e-commerce by allowing production to be globalized. In world trade, little volumes of air freight add up to large sums. The market for "same-day" and "next-day" delivery services, as well as transportation of urgent or time-sensitive items, has benefited from aviation's speed and dependability advantage over other means of transportation.

(f) Discuss whether the Indian government should increase the tax on airline fuel.

No. If the tax is passed on directly to passengers, it will raise airfares, reducing demand. Essentially, since the costs of flying an airplane are usually fixed, changes in fuel prices can shift a flight from profit to loss depending on the number of passengers on board. Even though an increase in aviation fuel taxes would have enormous environmental advantages, it may not be practicable because it would raise expenses for aviation industries, notably regional and low-cost airlines, which have seen significant expansion.

(g) Discuss whether more people will apply to be pilots for Indian airlines in the future.

During the previous three years, India's civil aviation industry has become one of the country's fastest expanding industries. India has surpassed the United Kingdom to become the world's third-largest domestic aviation market, with the UK anticipated overtaking India as the world's third-largest air passenger* market by 2024 (India Brand Equity Foundation, 2022). The Indian government has been attempting to increase the number of airports to accommodate the growing aviation traffic. India had 153 operating airports as of 2020. By FY40, India plans to increase the number of operational airports to 190-200 (IBEF, 20222). Furthermore, the sector's growing demand has increased the number of planes in service. By 2027, the number of planes is predicted to reach 1,100 (IBEF, 2022). Therefore, this has prompted an increase in demand for pilots; hence, likely a rise in those applying for the jobs.

References

India Brand Equity Foundation. (2022, January 10). Indian aviation industry, aviation sector in India, about, analysis. https://www.ibef.org/industry/indian-aviation.aspx#:~:text=The%20civil%20aviation%20industry%20in,passenger*%20market%20by%202024%5E