Between on-the-sidelines to economic mainstay
Indian economy is the fastest growing among the large economies of the world. The initiatives that India undertook in 1991 towards in economic liberalization has catapulted India to be the 5th largest economy of the world, overtaking the UK recently. By 2027, India is expected to pip Germany and by 2029, Japan, becoming the 3rd largest economy in the world after the US and China. The country has come a long way since independence in travel and tourism. It was never an economic priority but that has markedly changed lately.
Although lot more is still desired, the country has clocked 26.9 million in outbound travel and 17.9 million (10.9 million in Foreign Tourist Arrivals) in inbound travel in 2019, the pre-pandemic high. The post-pandemic number for the last years have been promising, especially in the outbound space. About 20 million Indians travelled overseas last year, marking almost three-quarter or nearly 75 per cent of the recovery. Inbound registered over 6.1 million FTAs which is around 56 per cent recovery vis-a-viz the high of 2019’s 10.9 million FTAs.
These numbers are being projected to register significant and incremental growth in the coming years. There is much optimism around India becoming the 3rd largest tourism source market soon. The recent Nangia Andersen LLP report titled ‘Outbound Travel & Tourism – An Opportunity Untapped’ brought out in association with FICCI projects Indian outbound tourism market to surpass US$ 42 billion by 2024 from US$ 22.9 billion in 2019.
Although the same cannot be said about inbound, but, at just 11 million in FTA in pre-Covid 2019, India will continue to register growth in FTAs. However, given some of the recent headwinds, particularly the interest being shown from the Government at the highest level and tourism’s acceptance as a major economic activity and engine of economic growth and employment generation, the growth can also be much stronger than expected if backed by real action on the ground.
The Government today is also keen to grow India’s share of international tourism pie. The Prime Minister himself addressed a conference recently exhorting every stakeholder to take tourism growth in mission mode. The country has set a target of reaching 25-30 million in FTA or nearly 50 million in overall ITA (International Tourist Arrivals which is FTA plus the Indian diaspora numbers) by 2030.
Rakesh Verma, Additional Secretary, Ministry of Tourism, Govt. of India, had recently stated that the MoT was looking at doubling the pre-pandemic 2019 FTA numbers by 2030. “The disruption of Covid is going to impact. So, the most conservative numbers we are looking at is still 25 million by 2030, but we also have a chance of achieving 30 million by 2030. And, the confidence comes from, 17.9 million international arrivals in 2019 which is just about 1.25 per cent of global tourist arrivals. A country like India deserves much better. So, there is a clear potential for us to increase our share in the global market,” he had stated recently at an event.
Recently concluded, SATTE 23 organised a conference on ‘India Tourism @75’ that was moderated by Aashish Gupta, CEO, FAITH. The panelists in the discussion included leading names from the government and the private sector, namely, K Mehboob Ali Khan, Secretary – Tourism, Union Territory of Ladakh; Abhay Kumar Singh, Secretary – Tourism, Government of Bihar; Rajiv Mehra, President, Indian Association of Tour Operators (IATO); Ankush Nijhawan, Co-founder, TBO.com; Manoj Samuel, CEO & Director, Riya Travel and Tours and Sumit Mitruka, CEO & Founder, Summit Hotels & Resorts.
Addressing a question on India’s ‘golden era of tourism,’ Nijhawan, said, “There are 160 million passports in India now. Over 26 million people travelled in 2019, which is one-fifth of the total population (number of passport holders in India). Look at the gap of people who have never been to overseas. China outbound before Covid-19 was at 150 million people. However, in the last 6 months, India is probably the most poised country being looked at by tourism, airlines, hotels, etc. And if you see the madness which I have never seen in SATTE ever before, that actually demonstrates how everybody is hungry for the India piece.”
Nijhawan further pointed that considering the slowdown in the European world, India is not going to see recession and even if it does, it will not go beyond 6 per cent. “The young generation doesn’t want to build a house, does not want to buy a car, but wants to have experiences. Around US$ 11.2 trillion is expected to be spent in the travel ecosystem. So the size is growing and India is going to be the fastest in that. 6 aircrafts are coming every month, and we are extremely well-positioned right now. I am in that perfect state which is going to see the wave and the next 10 years is going to be India’s.”
He also said that post-Covid outbound market recovery stands at around 75 per cent. India has the G20 presidency for 2023 and the amount of advantage that India is having right now is surely going to contribute to a bright future. Furthermore, he added that in a market like India, there is enough for everyone to grow. “Be it offline or online players, both will co-exist,” he said.
Sharing hotels’ perspective, Mitruka, added, “I think the hospitality is totally growing by leaps and bounds. We are already back to pre-Covid numbers. No matter where you are planning to open a hotel, you are packed. Also, we have a very good infrastructure as well. The domestic traveler is today very keen to come to the offbeat destination. Also, with the wedding season coming in, the hospitality is all blooming with the wedding segment.”
Gupta pointed that US$ 2.6 trillion are available for discretionary spend and during Covid, people had spent on anything but travel. He said that travel is at 7-8 per cent which was supposed to go to 30 per cent.
Khan pointed that in places like Ladakh, despite its own challenges in developing infrastructure because of limited construction season, higher transportation and material cost, tourism has thrived and is one of the most prominent sectors for the region’s GDP, contributing more than 50 per cent to the local economy.
Besides, there are opportunities in training and manpower, one of the key prerequisites for the success in services sectors such as travel and tourism. Khan said, “In Ladakh, we are emphasizing more on adventure tourism, but we don’t have skilled guides and coaches. I have been requesting the Ministry that we have a few national-level institutions that do certifications. So this is an area where Govt. of India should take an initiative to improve. At least every state should have an institute, where we can provide certifications and have reliable and certified guides.”
Samuel pointed, “We have an opportunity to look at Tier II and Tier III markets, which are still not explored. We are looking at 15 lakh travel partners which is still not explored. We together might be at a lakh or may be 1.5 lakhs. Imagine, air travel is hardly at 2-3 per cent. If it grows double to what it is, just imagine how it is going to be!”
Furthermore, Samuel added that post-Covid, IRCTC has taken the approach that the agents be allowed to take more ids, open more counters. This will help build more agencies in Tier II and Tier III cities and these agents will graduate into selling more tourism products and that is a positive side.
Besides, there is huge opportunities for businesses in the country’s burgeoning hospitality sector as India still has a lot catching up to do in terms of hotel inventory. For the Government, it augurs equally well, as the sector not only create huge labour employment in the construction sector but also later a lot many white- and blue-collar jobs once the hotel property is up and running.
“In India we have about 1.5 lakhs of branded rooms. Dubai and Singapore have more than that in their cities. So there is a long pathway for us to go. There is a handholding in the sector, but we can reduce the entire setup time. So we analyzed what the project would cost. Projects can cost the entrepreneur about 20-25 per cent more,” observed Gupta highlighting the latent opportunity in the sector and for the country.
Need of the hour
As India celebrates 75 years of independence, owning and accepting the past to carve out a better tourism future for the country’s and the world tourism, will be key. There is near unanimity on the country not having realized its tourism potential. Some ten years ago, UNWTO had projected India to be 50 million outbound travel market by 2020. That didn’t happen. The 11 million FTA number doesn’t do any justice to the vast tourism potential that the country holds, either. There are obviously gaps to be filled. As Gupta observed that what is not happening is utilize the tourism potential of India.
Commenting on the same, Ladakh’s Khan, said, “I tried to understand what needs to be done from the government side and the side of private stakeholders, operators etc. After 2 years, I have realized that the government interference should be the least, the govt. should regulate and at the same time ensure each is doing business.” He also observed that the compliance button which is seen in the tourism sector is very different from state to state.
Furthermore, he said, “I have been requesting the tourism ministry in every meeting, that as far as possible we must have uniform regulations and guidelines. And that uniformity should actually be circulated down the line. The private sector has to play a major role in the tourism sector in India, as India should be at par with the developed countries and India has the potential to be there. The government should facilitate the sector by improving infrastructure, air connectivity, rail and road connectivity, accommodation of every class, and telecommunication.”
Bihar Tourism Secretary, Singh, stressed that there is need to work on improving the overall tourism ecosystem. “We have to improve our tourism ecosystem. First is the infrastructure and second is how the government can incentivize the whole ecosystem. I see this as more of non-fiscal incentive like the single-window clearance system. There are so many documents required, and processes, but if we are able to provide a single window for clearances, I think our work is very well done. The third one is the skill ecosystem. That is most difficult aspect to understand as to how to train the person who is the first touchpoint for the visitor.”
Pointing that inbound revival is at about 33 per cent, Mehra said, “To promote and market the country, Government of India has to spend on promotions. Luckily, some of the states are spending money. And these states are the ones who are not only trying to sell the state, but India also. The Central Government needs to do much more than what it is doing right now. I don’t know who is going to help stabilize the airfares, the hotel rates. These are the things which affect the Indian inbound scenario.”
He particularly stressed that the main issue is the promotion abroad. “With the closing of offices abroad, the embassies and the high commissions, work very hard on these issues. Some of them are keen to promote India abroad, but some of them are not. If there is any nodal officer there, who will look after the promotion of tourism, we might be able to achieve something,” he added.
Mehra also issued taxation alarm that can weaken the private sector that’s instrumental in bringing foreign tourists. He said, “Government is not directly imposing tax, but imposing tax indirectly to people for depositing advance tax. Are we the people who are supposed to collect advance tax? Are we the agents for the government? As a result, many shops will shut. We are requesting them to reduce it to a 2.5 per cent.” Tour operators are charged 5 per cent GST on packages.
Commenting on GST on hotels, Mitruka opined, “I think the GST is fairly priced in hotels. At present, the slab is 12 per cent till room priced at Rs. 7,500/- and goes to 18 per cent after Rs. 7500/.”
Both, Samuel and Nijhawan, however lamented the recent TCS imposed on outbound travel. Samuel said, “20 per cent TCS will be implemented from July. But I don’t know why they are doing this. It is not fair from an industry perspective as we are just trying to come back and that is surely going to impact us.”
Singh, however, also pointed that the tax yield helps Government in so many ways and are often passed on the people in the travel and tourism businesses as well. He pointed, “If somebody comes to Bihar and tries to create any amenities from a tourist perspective, we are reimbursing their registration cost, certain parts of GST, giving incentives on electricity. This is a whole circle.”
Ladakh Tourism Secretary and an (IRS) Indian Revenue Service cadre himself, Khan pointed, “Government has to run the country and so we need revenue. In this year’s budget, the expected revenue would be around 23 lakh crores and the spending would be around 47 lakh crores. How does the government fund these schemes and programs? We have to ensure the integrity, safety, security, hospitals, roads and so much more of the country. India actually needs to have honest taxpayers. If we look at income tax, hardly 5 per cent of the population pay taxes and we are servicing 95 per cent population with only 5 per cent of the tax collection.
Big Picture @75
“Government decides and the private (sector)follows. This equation won’t work now. We all have to work together and find the solutions and improve. For too long, we have not been interacting. We have to sit together and design the guidelines, forms, pathway etc.,” recommended Khan.
Singh stressed the need to think out of the box. He said, “We have a Gatishakti portal today. Now, there are two aspects of tourism. One is the hardware part, that is, the infrastructure part and the other is the services. So we already have the Gatishakti portal where we are plotting all our infrastructure, be it the last mile connectivity. Now is time that we also start plotting our services. So, these two things if connected can act as a game changer.”
Nijhawan stressed the need to build brand India. “It hurts me when I travel to exhibitions like this, and India is placed in a small corner as Incredible India. Why can’t we have a big booth like other countries? I think it is time for Incredible India to move the curve 360 degree and attract tourism in India,” he stressed.
“We have now also been talking to the state governments. Let’s all come together, the state ministries, the Center, and others. If we all come together and promote together, get bigger spaces, showcase products together, I think we will be able to do it,” the IATO President observed.