This colleague was not alone. Many friends too were buying tickets for destinations they had no specific plans for going, except that the tickets were cheap and that became the trigger in itself. I could think of several occasions when I have been tempted to head for a nice, exotic-sounding locale purely because an internet search (and a lot of that was happening) threw up some good fares.
No longer. Anecdotally, I can say that hardly anyone I know is visiting the travel websites, at least to find the best fares. Not that the airlines are offering too many deals any more. Statistically, the numbers are telling. The first quarter of 2008 saw India's air passenger growth at 11 per cent compared to nearly 28 per cent for the first quarter of 2007. If you were to pick any airport, let's say Mumbai, traffic growth has dropped to single digit from double digits and forecasts are that it will fall further.
So, the rising price of crude is already telling on air traffic consumption, as airlines are unable to hold on to rising fuel costs. In a way that's good news because consumers are forced to reckon with the real prices of their air tickets as opposed to those which are a product of extreme competition or general start-up adventurism.
The same cannot be said for the overall consumption of oil products in India, which seems to be displaying amazing inelasticity. One reason is that petrol, for instance, has barely gone up 4% in the period when overall crude prices have gone up anywhere between 80 and 90 per cent. Which means that consumers are not, as we are all only too well aware, reckoning with real fuel prices, particularly when it comes to using cars and two-wheelers.
There is a fiscal argument to this as there are some fiscal solutions as well. Let me focus on the demand side. I was speaking with Crisil Principal Economist D K Joshi on the subject. According to him, we must be the only country apart from China where consumption has not only not reduced but continues to rise. "If you look at countries in and regions like Europe and North America, there is enough evidence to show that terms of barrels per unit of GDP, consumption has reduced," he says.
The emotional response to this is that countries like the US have long enjoyed plentiful consumption (as they continue to do) and should now allow us the privilege of burning more fossil fuels. Particularly if we can afford it. Of course we can't as all the economists are saying