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Monday, 08 July, 2019, 15 : 11 PM [IST]

Union Budget 2019: Big missed opportunity

There are times when one is unable to contain one’s optimism in anticipation of big news coming but then the fizz gets taken out and the feeling instead is of big let-down. At 1.15 pm post the closure of the budget on July 5th, 2019 this is what happened with the Tourism Industry of India.

There are two sets of drivers which bring positive news to the Indian tourism, travel and hospitality industry through the budget. ‘First Set’ addresses pain points which directly impact the Indian tourism, travel and hospitality players and their competitiveness. ‘Second Set’ addresses macro-economic conditions of India which create a feel-good environment for the growth of the Indian tourism, travel and hospitality Industry.

Let us look at the ‘SECOND SET’. The intent of driving INR 100 lakh crores into Infrastructure over the next 5 years, the relaxation of FDI in aviation, the resurgence of inland waterways, the creation of the regional airports grid and highways, privatisation of railway infrastructure and of Air India will certainly create long term conditions for growth of domestic tourism and dispersal to hinterlands.

The relaxation of FDI in insurance and media, and of government holdings below 51% in non-financial industries, the favourable conditions for FDI and foreign portfolio investors, the enhancement of 25% corporate tax to a turnover of INR 400 crores which covers almost 99%+ of the Indian corporates, the support to NBFCs all of these will stimulate travel and will add buoyancy to corporate travel both inbound and domestic.

Grant of an additional INR 1.5 lakhs interest exemption to individuals with retail households’ loan will effectively, post tax, put in almost INR 1lakh in the hands of such individuals which will be channelised into discretionary spends such as travel.

Barring the fuel surcharge on petrol and diesel which will have a negative impact on household savings and road travel, the budget ticks positive in most of the boxes stimulating macro-economic conditions in the ‘SECOND SET’ of tourism drivers.

However, the real disappointment sets in when one looks at the ‘FIRST SET’ of drivers. The pain points directly impacting the Indian Tourism travel and hospitality industry remain unaddressed and even unmentioned - to be looked into.

The lack of Infrastructure status to hospitality and conventions which increase their funding costs, the non-availability of export status to our foreign exchange earning members, the non-recognition of the fact the Indian adventure and the Indian tourism heritage industry can itself create a huge wealth of opportunities, the non-addressable of seamless travel from tourist transportation which could have resulted by creation of a single entry tax regime, lack of focus on creating new destinations which can take the load off the existing overloaded ones, the levy of GST of 28% which is making us hugely globally uncompetitive, the non-availability of credits for F&B and tourist transportation, the non-parity and uncompetitive levy of GST on forex earnings in tourism , the non-availability of IGST to hospitality which is breaking the tourism GST chain, the GST levy on outbound travel and the lack of a pre-emptive tax of 1.8% for tour operators all of these stay as points unaddressed. More so when we have a GST disadvantage of almost 15% vs our East Asian neighbours. India’s share is 1%+ of the International Travellers Arrivals, but the share of China is estimated at 4.5%+, Hong Kong ~ 2%+, Malaysia ~2% & even the city state of Singapore is at 1%+.

These are driving Tourism away from India and out of India due to a tax and a cost of funds driven disadvantage. While the outlays on tourism have been increased to about INR 2189 crores from INR 2150 crores, these stay negligible as a % of our total contribution to GDP. While the passing reference on 17 iconic monuments is thankful welcoming, really it is a repeat of a measure announced in an earlier budget.

It was a really big missed opportunity. Each sector of our industry be it Leisure Inbound, Domestic, Adventure, MICE, Heritage are highly under-penetrated. Indian tourism has an inherent global comparative advantage because of its cultural and geographical heritage and can double its total employment impact to almost up to 10 crore jobs over the long run. The time was to make big ticket reforms which were missed as was felt even by corporate India across all sectors and the response of the stock market thereafter.

The real the irony of the fact is that Tourism is the single panacea to all of the macro themes announced in the budget. Tourism can stimulate large scale core Infrastructure, it can enhance job dispersal across our hinterlands and prevent undesirable city migration, it can stimulate vast entrepreneurial roles for our MSMEs, it can correct our gender balance with more women on roles, create more opportunities for rural and hinterland economy, it can attract tremendous foreign exchange and it can build on our relations internationally - all of which were themes of this budget.

Some feel, this was just testing waters as the real change will come in the full year budget. But in essence it was a ... big missed opportunity to bring tourism as a mainstream socio-economic driver of India...!

But this will not dampen our joint efforts to continue dialoguing but to just enhance it even more to further elevate the strategic profile of Indian Tourism with the policy makers both at the centre and at the state governments....

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