February 3, 2021 TnH Global

Budget 2021: No end to official apathy towards the tourism industry

The industry is deeply disappointed with the Union Budget 2021-22 as it could not live up to their expectations. The Budget did not offer any immediate and direct support to the tourism sector.

Finance Minister Nirmala Sitharaman presented India’s annual budget 2021 on Monday, which came amid widespread hardship caused by the pandemic. Tourism Industry, one among the worst-affected sectors, had high hopes from the budget but that hopes have been belied.

Last year, the global outbreak of Covid-19 has ravaged the Tourism sector, bringing the industry to a standstill, forcing the closure of thousands of companies and causing massive unemployment. India’s tourism sector probably suffered the most due to the severe lockdowns and lack of any government support at the time of crisis, although the government did announce many packages for other sectors. Facing severe liquidity crisis, today most travel agents and tour operators don’t have the cash to restart or sustain their businesses

Being among the worst-affected sectors, the industry had huge expectations from the budget. But Finance Minister Nirmala Sitharaman’s budget, belying all the expectations, fails to offer any sector-specific solace or succour to the industry. None of the industry’s budgetary suggestions or proposals such as extending infrastructure status, releasing pending dues under SEIS scheme for 2020-2021, giving tax incentive or offering any financial relief was accepted; the government also did not heed to the industry’s demand to abolish TCS which makes Indian travel agents globally uncompetitive. Naturally, there is palpable disappointment and despondency in the fraternity for not getting any consideration in the Budget. The budget did not offer any support and guidance as to how the sector can be revived and regain its pre-pandemic ground. This is despite associations representing different segments of the industry have constantly been apprising the government about the plight of the sector and pleaded for support.

At a time when the level of unemployment is extremely high, GDP is estimated to contract by 7.7% in the FY 2020-21, economic inequality is growing rapidly, capital formation/investment is low and the challenge to create jobs is colossal, overlooking the plight and woes of a key sector like tourism, which is labour-intensive and known for its job creation potential, shows the government’s short-sightedness and lack of proper understanding when it comes to the tourism sector. Experts have been advocating that policy-makers should focus on service sectors like tourism for future jobs rather than being obsessed with manufacturing, which, despite so much support from the government, has failed to create adequate job opportunities to lessen unemployment in the country.

Coming to the Budget and the industry’s reactions to it, FAITH, the umbrella collective of all the national associations representing all segments of India’s tourism industry, is disappointed with the Budget not providing any immediate direct support to the tourism sector. Its Chairman Nakul Anand said that lack of immediate and direct support in the Budget for tourism is disappointing. According to him, from the Budget, the industry was looking at immediate and short-term measures for critical revival, which has not happened. He regretted the missed out opportunity of providing immediate support. FAITH was also hoping for budgetary provisions for activating Indian missions abroad in each country to communicate a tourism ready India for maximum reach.

While welcoming the budget’s proposals for augmenting infrastructures such as rail, road, ports and airports, Anand said, “These infrastructure measures may boost tourism over a long term but only once they are implemented.” Anand also welcomed the measures to change the small companies’ capitalisation and turnover and support to single Person Company, which according to him, may boost the micro and small tourism entrepreneurs in boosting their organised state.

Covid has damaged the travel & tour intermediaries. It was critical to protect the business of Indian travel agents and tour operators and a structured mechanism was required to future secure travel agents’ payments to ensure that security for travel agents and operators’ survival. This was key as travel agents’ payments to principals is unsecured credit and some form of mechanisms whether escrow or guarantee or underwriting based mechanisms was needed to be in place to ensure that travel agents and tour operators money stays secure. FAITH was also looking forward to solutions of the industry’s GST-related woes in the budget that did not happen.

Non-fulfilment of any of their expectations in the budget announcement has thrown the industry into a state of shock and dismay; they see no end to the Government negligence and apathy towards the sector, therefore, no end to their woes.

However, everything is not disappointing. From a long-term perspective, the focus on infrastructure, health and hygiene will help in developing a better ecosystem for tourism. Lack of infrastructure and that of hygiene have often been cited as some of the reasons for India not attracting an adequate number of tourists worth its size and stature.

According to Indiver Rastogi, President & Group Head – Global Business Travel – Thomas Cook (India), “Privatisation of smaller airports in tier 2 & 3 cities under the asset monetisation program will serve to extend accessibility to regional circuits and India’s hidden gems, also increase the affordability of air travel. This initiative will aid in the creation of a viable hub and spoke model to catalyse the government’s initiatives around Project UDAN and boost regional connectivity. He also welcomed the spotlight on disinvestment including that Air India. The government aims to complete the long-pending process of the privatisation of the debt-laden national carrier, Air India, by the end of the next FY. Benefits towards aircraft leasing provided via a tax holiday and exemption are also welcomed.

With its focus on disinvestment and privatisation, the budget 2021 has reformist direction aimed at boosting growth. The focus on infra and healthcare through public investment is expected to provide a much-needed impetus to economic growth. The government has more than doubled its Health expenditure, increasing it by as much as 137%. The budget has enhanced infrastructure outlay by 35%.

According to Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts, while there is nothing specific on the tourism and hospitality sector in the budget, the broader focus on the budget on increasing consumption and infrastructure spend by the government will have a positive impact on the hospitality sector. The government has done the right thing by not introducing any new tax or COVID cess as some had anticipated. We also believe that the amount allocated for COVID vaccination is a positive for our sector as more people get vaccinated it will encourage people to travel.

The budget is also helpful for start-ups including that of tourism sector. Sandeep Lodha, CEO, OYO’s Weddingz.in said that they are pleased to see the Government’s efforts towards promoting the start-up ecosystem in India.