NEW DELHI — India needs to fix structural issues in its aviation market that keep operating costs high for domestic airlines, a top industry leader told CNBC.

Aviation has a bright future in the country but carriers are struggling to square the differences between high operating costs and the low, competitive fares they have to offer, according to Ajay Singh, chairman and managing director of SpiceJet.

SpiceJet is a low-cost airline in India and has one of the largest market shares in the country for the number of domestic passengers carried.

"Demand outlook remains strong. People are shifting and moving from trains into planes, and more and more people are flying as the economy grows, as disposable incomes increase," Singh told CNBC at the India Economic Summit. He added that airlines are operating "in an environment where our costs are among the highest and our fares are amongst the lowest."

India is considered to be one of the fastest-growing aviation markets in the world, but not every airline has been able to weather the challenging operating environment.

Jet Airways, which was once India's biggest private carrier, stopped flying in April after the company ran out of cash. In June, it filed for bankruptcy after its lenders failed to agree on a revival plan. On the other hand, the Indian government is still struggling to sell debt-laden national carrier Air India, and Reuters reported last month that New Delhi could be open to selling a partial stake in the airline to a foreign competitor.

Singh pointed out airlines are struggling because India has high taxes on aviation turbine fuel; carriers also pay high airport charges as well as duties on aircraft parts that are re-imported after repair.

"I think it's time we made the structural changes that are required in aviation and made Indian aviation competitive with our peers around the world," he said. That includes ensuring India's aviation fuel costs, import duties and airport charges are on par with other countries in the region. If that happens, aviation can give a boost to tourism and the economy, Singh added.