India termed as "very disappointing and surprising" the FAA's decision to downgrade India from Category I to II after two safety audits carried out in September and December last year.
Air passengers to and from the US may have to face the brunt as Indian airplanes would have to go through more engineering and other safety checks on the American soil.
As per the FAA, the downgrade means that the Directorate General of Civil Aviation (DGCA) does not meet the safety standards set by UN agency International Civil Aviation Organisation (ICAO).
The FAA downgrade of India's safety rankings, conveyed to DGCA chief Prabhat Kumar, would effectively bar Air India and Jet Airways from increasing flights to the US from the current level.
They would also not be able to enter into any new code-share relationships with any US airline.
The downgrade does not mean that these airlines are unsafe but show that the DGCA's safety oversight is not enough to properly monitor safety performance of Indian carriers, officials explained.
While the move may not immediately impact the 28-a-week flights (21 of Air India and 7 of Jet Airways) to the US, it would make it difficult for these two Indian carriers to expand their operations to other American cities.
At present, Air India operates to Chicago and New York while Jet Airways flies only to New York.
It could also have an adverse impact on Jet's entering into a codeshare with an American carrier and Air India's joining the Star Alliance.
Civil Aviation Minister Ajit Singh termed as "very disappointing and surprising" the US aviation regulator's decision.
"We are now 95 per cent compliant" with what the FAA had wanted DGCA and the government to do in terms of taking corrective measures, he said, adding the remaining five per cent, that is recruitment and training of senior technical personnel in the DGCA, would be completed by March.
"DGCA will remain in constant touch with FAA, which will hopefully hold another review thereafter" to revert India to Category I, Singh said.
FAA conducts the International Aviation Safety Assessment Program (IASA) to assess the civil aviation authorities of each country that has carriers operating to the US.
As per the FAA's IASA Program of November 22 last year, the countries in Category II include Bangladesh, Barbados, Indonesia, Ghana, Serbia and the Philippines.
The FAA has only two categories and Category II means the aviation safety records of these countries "do not meet ICAO standards". Pakistan is placed in Category I.
At a press conference here, the Civil Aviation Minister refused to give a timeline by which the FAA could revert India's position to the top category but said all the corrective steps suggested by it would be implemented by March. "As soon this work is done, we expect them (FAA) to come and review again."
He said the FAA downgrade was based on its findings of December when DGCA had completed 75 per cent of the tasks the FAA wanted it to carry out.
Asked whether the US regulator's decision was part of the diplomatic face-off between the two countries over the issue concerning Indian diplomat Devyani Khobragade, Singh said "I don't believe this. There is no connection between the two."
Apparently countering FAA's observations that India did not meet ICAO standards, he said the ICAO had conducted its own safety audit last year and India had scored "much more than the global average" in all fields, barring the organisation of aviation safety machinery.
A Civil Aviation Ministry official said this was the first time that India has been downgraded and it could take at least 6-8 months for it to be corrected.
Air India's entry into Star Alliance could be affected as also Jet's plans to have a codeshare with American Airlines to Chicago and then connecting to 20 cities could be hit, he said.
The downgrade also means that DGCA's capability of conducting safety audit and inspection of Indian carriers has come in to question.
To avoid a downgrade, the Indian aviation regulator has been rushing to take several steps in the past few days to recruit more professional and technical hands and preparing technical manuals to provide for fresh rules to meet the exigencies of the growing Indian aviation market.
In a status report filed with its US counterpart last week, DGCA had said it had addressed the FAA's concerns over 33 aviation safety issues.
The report was filed a day after the Cabinet approved a Civil Aviation Ministry proposal to allow DGCA to hire 75 experienced professional and technical hands directly from the market, instead of going through the UPSC recruitment route, and to pay them salaries at market rates.
Among the concerns raised by the FAA over 33 issues were filling up of several senior positions including those of full-time Flight Operations Inspectors (FOIs), beefing up of aviation safety training programmes and preparing manuals and documentation on certain safety issues.
Other major concerns of the FAA include training DGCA officers on new types of aircraft entering the Indian market, including the Boeing 787 Dreamliners, and DGCA's safety oversight on training schools.
The FAA, which has over the years downgraded ratings of several nations including its closest ally Israel at one time, uses 'downgrade' as more of a tool to pressurise countries to shape up their regulatory schemes but not as a warning of imminent safety problems, FAA sources had earlier said.
KPMG's Aerospace head Amber Dubey said FAA should help DGCA take steps to revert back to the Category 1 status at the earliest, while expressing fears of a domino effect the decision might have on Air India's member of Star Alliance, Jet's plans to go global through the Abu Dhabi hub.