It was definitely not what the Indian travel and tourism industry has been expecting. Budget 2021-22 has come as a rude shock for an industry, which has faced the most severe brunt of the COVID-19 pandemic in the last one year. Global tourism suffered its worst year on record in 2020, with international arrivals dropping by 74% according to the latest data from the World Tourism Organization (UNWTO). Destinations worldwide welcomed 1 billion fewer international arrivals in 2020 than in the previous year, due to an unprecedented fall in demand and widespread travel restrictions.
This collapse in international travel represented an estimated loss of USD 1.3 trillion in export revenues – more than 11 times the loss recorded during the 2009 global economic crisis. The crisis has put between 100 and 120 million direct tourism jobs at risk, many of them in small and medium-sized enterprises.
India is still among the countries which have still kept their borders closed for international travellers since March 2020. Considering all this Indian travel industry had pinned many hopes on the budget, but it all turned to be nought. Instead, central government has slashed the budgetary allocation for the Ministry of Tourism by 19% from Rs 2,500 crore in 2020-21 to Rs 2026.77 crore this year. The budget has allocated Rs 1088.03 crore for development of tourism infrastructure for FY 2021-22 compared to Rs 1655 crore last fiscal.
Although, the budget has raised the publicity fund from Rs 590 crores last fiscal to Rs 668.72 crore in FY 2021-22. But, out of this, ₹524.02 crore is for the overseas market and ₹144.70 crore has been kept for domestic tourists. This seems an exercise in futility as it is yet not certain, that when are we allowing foreign tourists to enter India, and it is definitely not going to happen anytime soon. Revival from COVID impact will not be seen minimum for the next financial year till vaccination is fully undertaken with no observed side effects in all source and destination markets.
The industry was expecting a major push in the budget. Many presentations and recommendations have been submitted to the Finance Ministry by industry association FAITH for the revival and survival of the tourism industry. However, the Budget 2021-22 did not concede any of those demands of the industry.
Quite obviously, all major tourism-sector related industry bodies including Federation of Associations in Indian Tourism & Hospitality (FAITH) and Indian Association of Tour Operators, expressed “deep disappointment” on the lack of immediate direct support for the sector. Not addressing any of these critical measures in the budget announcement has thrown the industry into a state of shock and deep dismay.
“The tourism, travel & hospitality industry was looking at support for immediate and short-term measures for critical revival. This has not happened in the budget announcements,” FAITH said.
“Lack of immediate direct support in budget has disappointed the Indian travel and tourism industry,” Nakul Anand, Chairman, FAITH, commented. Industry was looking at support for immediate and short-term measures for critical revival. This has not happened in the budget announcements. “While infrastructure measure announced as budget announcements, may boost tourism over long term, the opportunity for immediate support has regretfully been missed out,” Anand added.
Anand said that it was important to bring overseas global OTAs operating in India into the tax net of GST and other taxes to have a level playing field with Indian travel agents and tour operators. “There was a need for 100% tax exemption and permission to write back income / TDS/ GST etc to travel agents and tour operators on their transactions when airlines windup or closedown. This would have protected them and also Indian consumers,” he said.
FAITH Associations were also looking forward to GST policy issues in tourism being addressed. Anand said that it was important to bring down the 18% GST category for hotels to the category of 12% GST for post-COVID revival and there was also a need for providing an option of GST at 12% to restaurants with full set offs. “With a lot of state taxes on tourism, travel & hospitality at state level, subsuming of GST on fuel, inter-state transportation taxes, power cess, liquor excise and also property taxes, cess on parking charges needed to be made available as input tax costs,” Anand added.
He further said that the GST on tour operators should have been brought down by 1.8% with full setoffs for revival support. “Hotels should have been enabled to levy IGST to enable them to give GST credits to Indian corporates who do Interstate events and ensure domestic retention of Indian MICE an upmost necessity post-COVID,” he said.
Subhash Goyal, Honorary General Secretary, FAITH and President, Confederation of Tourism Professionals, said, “Not just tourism, services sector by large has not been taken care of in this budget, which is the largest employment generator.”
“We expected much more than what was announced. Travel, tourism and hospitality was completely neglected,” Jyoti Mayal, President TAAI, commented.
Gurbaxish Singh Kohli, Vice President, Federation of Hotel and Restaurant Association of India (FHRAI) said, “Hospitality and Tourism roughly account for 10 per cent of India’s GDP and employ nearly 9 per cent of India’s working population and yet, it failed to find space in the Union Budget. Our pre-Budget memorandum included some priority reforms to stabilize the industry such as Review of the Kamath Committee recommendations, Classifying Hospitality under the RBI Infrastructure lending norm criteria, Industry status to hotels, restaurants and resorts across the country, to include Hospitality and Tourism in the concurrent list, MAT waiver for a period of three years, IGST billing to hotels for corporate and MICE bookings. The hospitality industry is disheartened and feels demotivated in its darkest hour.”
“With zero foreign exchange earnings and less than 25 per cent of pre-pandemic revenues, the sector is facing an existential crisis. The industry is the fall guy for the Govt. We stand by and come through for the Govt. in its every need, as we did during this pandemic, but we are surprised that the sector could not find even a mention in the FM’s budget. We wish our Govt. would study what other countries have done to ensure tourism, the worst-hit sector, is kept alive. The Hospitality and Tourism industry was looking forward to some relief measures to lift this most severely affected industry by COVID19. Instead, it has yet again completely and fully chosen to ignore us.”
For some years now, there has been discussion around creating a new category of short-stay visas for those who travel to India particularly for yoga, Ayurveda and wellness treatments. It was the ideal time to fast track this facility. Wellness tourism is a fast-growing market which has been catalysed by a pandemic-fuelled focus on health and retreat. Kerala especially stands to benefit greatly if India is positioned among the world’s leading wellness travel hubs.
Vineet Verma, Executive Director & CEO, Brigade Hospitality said, “It is unfortunate that the Hospitality & Tourism sectors that have been the worst hit by the pandemic have found no mention in the current budget. It is important to extend some breathing space to the almost choked industry for it to even survive and before it finds its own way to get on to the path of recovery.”
Vishal Suri, Managing Director, SOTC Travel said, “Addressing concerns like immediate waiver/rationalisation of 5% TCS for outbound tourism, rationalisation of taxes would have created the necessary boost for the tourism segment.”
Aloke Bajpai, Co-founder & CEO, ixigo said, “It’s sad to see that no extra spends or tax incentives were announced to provide immediate relief to the severely affected travel and tourism sector.”
The industry largely expected a more liberal and reasonable investment and loan framework from the union budget. A more flexible and tolerant financial environment could have supported small hospitality players to explore more growth avenues in these tough times.
Chhavi Chadha, Founder of Bespoke Tailormade Experiences felt that the budget does not address the issues of the travel, tourism and hospitality sector. Tarun Gulati, Director, Himalayan Hotels & DJUBO Hotel Tech Suite said that there had been a lot of expectations from the government on the budget. But the government failed to give tourism industry any importance.
Dr Krishna Kumar, CEO of TravelSpoc, said that inbound tour operators were the biggest hit during the pandemic due to severe revenue decline that resulted in layoffs and unemployment. Industry required a lot of support from the government. Rajeev Kale, President & Country Head – Holidays, MICE, Visa, Thomas Cook (India) Ltd thought that the budget was noticeably silent on specific announcements towards the travel and tourism sector.
Even the domestic tourism would be tough to revive in near future. With the academic session delayed, the examination schedule is going to eat up most of the traditional summer vacation period. Family vacations will be scarce in coming season. With no budgetary support and bleak business prospects, travel and tourism industry in India is left wondering upon, what lies next for it. (With input from various sources)