Leithen Francis/Hyderabad, India

India has become one of the top three markets for business aviation in the Asia-Pacific region, along with Australia and China, but the challenges ahead threaten to undermine the sector on the subcontinent.

The rise of the market here was sudden, largely driven by the country's economic growth and changing attitudes toward business aviation.

Business people in India used to be reticent about showing their wealth. But now, even ostentatious displays are deemed acceptable.

What is more, executives and entrepreneurs in India increasingly see corporate aviation as a valuable business tool. For those who need to visit three or four smaller cities in a day, owning an aircraft is a necessity. India's commercial aviation industry is inefficient for point-to-point travel between second- and third-tier cities.

At the recent India Aviation air show in Hyderabad, one of the aircraft on display was an Embraer Phenom owned by Joyalukkas, a jewelry store chain in India. The owners need a business jet to visit their suppliers in small cities and towns. The Phenom very light jet has the range to cover all of India and some neighboring countries.

However, there will always be those who opt for the larger end of the line because they have overseas companies and need the extra range bigger jets provide. Indian firms are increasingly investing overseas. Tata Group has bought brands such as Tetley Tea, Land Rover and Jaguar. It turns out that running a foreign business can be easier than running one in India. The rules and regulations overseas are less troublesome and taxes are lower.

High taxes and red tape are weighing down India's business aviation industry. Importation of business aircraft is subject to an 18.5% duty. Aircraft owners, however, can reduce this to a 3% tariff if they agree to lease aircraft for charters. However, there is also a 12.5% value-added tax (VAT), a higher rate than for many other goods sold here, because the government assesses business jets as a luxury.