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Industry’s reaction to Union Budget 2019 -20

 

Finance Minister Nirmala Sitharaman presented the Union Budget 2019 in parliament today. The Govt. announced of developing 17 ‘iconic sites’ for tourism sector. Industry has hailed the Budget stating that it will give a boost to the tourism industry. T3 brings you opinion shared by the industry.

 

Aashish Gupta, Consulting CEO, FAITH

 

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 115 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 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  ₹ 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 ₹ 1.5 lakhs interest exemption to individuals with retail households’ loan will effectively, post tax, put in almost ₹ 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 ₹ 2189 crores from ₹ 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 upto 10 crore jobs over the long run. The time was to make big ticket reforms which was 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 .

 

Deep Kalra, Founder & Group CEO, MakeMyTrip

 

Given the agrarian crisis in the country, this union budget appears to have been more focussed on rural India and the poor. From Travel and Tourism industry point of view, while we are pleased to hear of the focus on infrastructure related spends with the investment of 100 Lakh Crore over the next five years, it is critical that we are able to build better connectivity to key tourist destination, as that still remains a sore point for one of the fastest growing service industry in India. There was no specific mention of fund allocation for UDAN, the regional connectivity scheme which is disappointing given it needs special attention to boost domestic travel which has seen some headwinds over the last few months. The government looking at public-private partnership route with a bigger role envisaged for the private sector in Railways is significant. While the long overdue, single quarterly GST for those with revenue less than 5 Crore is a welcome move, further simplification of GST including centralized registrations under GST Laws to bring compliance burden down especially for service and ecommerce sectors remains critical. The initiative of e-invoicing through GSTN to curb tax evasion is a welcome move. However, keeping in with ease of doing business initiative Government should in fact look to completely do away with invoicing under GST. Input credit flow should be restricted to transactions reported on GSTN portal only. Another area of GST rationalisation could be the rate of tax on premium hotels to promote inbound travel. This has an immense potential to generate employment in India.

 

For start-up and entrepreneurial ecosystem in India, there wasn’t a lot of substantive announcement barring the proposed easing of angel tax for start-ups that has been detrimental to building a world-class start-up ecosystem. The announcement around start-ups not to be challenged on valuation to determine angel tax is a welcome move and should hopefully reduce litigation.”

 

Madhavan Menon, Chairman & Managing Director, Thomas Cook (India)

 

It is clear that growth is a priority for NDA 2.0. Steering away from taking a populist approach, the Government has taken a long-term view on revitalising the Indian economy. With this budget, the Government has addressed the key fundamental challenges like liquidity, FDI, employment and infrastructure development. It has also focused on enhancing the role of AI, robotics, technology which will lead the nation on the path to be future ready and benefit employees and workforce, at large.

 

The lowering of corporate tax (25%) up to companies with turnover of 400 Cr. is a welcome move especially to MSMEs and social enterprises. The effort is clearly on environmentally responsible growth, thereby living up to our promise of sustainable development.

 

For the Travel and Tourism sector, it is encouraging to see the focus being given to the aviation industry. The Finance Minister’s announcements on FDI, aircraft financing and leasing, policy interventions for development of maintenance, repair and overhaul in India (MRO) have provided the much-needed support to the industry, and will certainly have a multiplier effect on airfares and job creation.

 

With the Government’s UDAN scheme being further fortified by inclusion of additional smaller airports, it will augment regional air connectivity, thereby generating an increase in inbound and domestic tourism. A noteworthy initiative is the setting up of 17 iconic tourism sites as world-class tourist centres, coupled with a Digital Repository as a bank of documentation on India’s tribal history and heritage. A focus on overall transportation infrastructure with far reaching initiatives such as Bharatmala for roads and Sagarmala for waterways, along with massive rail modernisation and safety will have long-term positive outcomes for the country.

 

Sunil Bhaskaran, MD & CEO, AirAsia India

 

The government’s proposal to introduce aircraft financing and leasing will bring down the costs for carriers hopefully. Also, the announcement of identifying and developing 17 iconic tourism sites will boost domestic air travel demand.

 

Vijay Dewan, MD, Apeejay Surrendra Park Hotels & Chairman, CII, West Bengal State Council 

 

This Union budget is not only pro-working class, but also pro-development and growth. Tax exemption of upto INR 5 lakhs is a huge benefit. Increased FDI in key sectors like aviation will help boost the sector. Rationalisation of multiple labour laws and making India hub for the manufacturing of electric vehicles is a positive step. Development of 17 iconic sites to be transformed in world class destinations will help boost foreign tourist arrivals. However, industry demand of free visas for five years and competitive GST rate has not been met. The Indian travel and tourism sector which has emerged as a key growth driver and is one of the biggest employment generators didn’t see any concrete provisions in this Union budget.

 

Vishal Suri, Managing Director, SOTC Travel said,

 

Travel and Tourism industry is a vital contributor to the country’s growth.  The proposal statements made by the Finance Minister in the Union Budget will provide impetus to the tourism sector. As India is poised to become the 3rd largest domestic aviation market, the budget has focused on reviving the concerned sector by opening FDI doors. Liberalisation of FDI will attract investments from foreign players, which will revive the current cash-strapped aviation sector, thereby stabilising the aviation industry, which will in turn lead to incremental benefits for the tourism industry.

 

India has a rich heritage of natural beauty which remains untapped and unexplored on account of their remote locations. Impetus to projects such as Incredible India, UDAN, new initiatives to promote our heritage destinations, better road connectivity, focus on developing 17 iconic tourism sites, and budgetary allocation of Rs 100 lakh crore for infrastructure development will help catalyze strong domestic tourism.

 

JB Singh, President and CEO, InterGlobe Hotels

 

The budget certainly provides a holistic approach to an advanced future. The investments targeted towards infrastructure with Bharatmala programme and national transport card will help develop national road corridors and highways and aide seamless travel. With a vision to upgrade 1,25,000 km of road length over the next 5 years, tier II cities will be significantly connected to the urban cities thereby making the tourism industry grow. The initiative to develop 17 iconic tourism sites into world class tourist destinations will also provide a major fillip to the industry. Concluding the Union Budget 2019 with infrastructure and innovation at its forefront, the tourism industry is sure to get a boost in the years to come.

 

Anil Parashar President & CEO, InterGlobe Technology Quotient

 

Union Budget 2019 definitely marks the beginning of the new India. It will give a much needed boost to the Indian travel and tourism sector. With the ongoing UDAN scheme for common man, we can expect better air connectivity, improved infrastructure and bridging of the gap between rural and urban sectors. Another visionary project ‘Sagarmala’ will enhance waterways and port connectivity that will uplift cruise tourism in India. As the government understands the need to invest and improve infrastructure, I am sure this budget will add pace to the economic development of the nation.

 

Jaideep Ghosh, Partner & National Head – Transport, Leisure & Sports, KPMG in India

 

Travel & Tourism contributes nearly ten percent of our GDP. Union Budget 2019 continues to encourage promoting heritage attractions, and proposes a digital repository for tribal and rural tourism attractions. These measures along with the proposed massive transport and social infrastructure backed by digital platforms and financial sector reforms will further boost tourism.

 

Nalini Gupta, Head of Costa Cruise, India

 

Indian Coastline has immense potential for cruise tourism. The proposed Inland waterways development by the government is a positive step towards boosting coastal tourism in India.  The Varanasi – Haldia route will be an opportunity for river cruises to provide inland waterways tourism to domestic and foreign tourists. Additionally, the Government's plan to enhance 17 iconic tourism sites into world-class tourist destinations will not only increase inbound foreign tourists and domestic tourism but will also boost related infra structural development. The proposal of an ATM-like, One Nation One Card for pan India travel will ease inbound travel and will be convenient for tourists to explore India without any hassles. We look forward to leveraging these opportunities for the upcoming season.

 

Balu Ramachandran, Sr. Vice President, Cleartrip

 

The union budget has made the aviation sector more conducive for increased FDI by proposing to increase the FDI caps. This will attract increased interest in the Indian aviation space by enabling controlling stake for foreign carries and should add increased momentum to the Air India privatization process. The success of the AI privatization process is crucial to the health of the Indian aviation space as we can’t afford another airline bankruptcy after the jet airways event.   

 

Rakshit Desai, Managing Director, FCM Travel Solutions, Indian Subsidiary of Flight Centre Travel Group

 

The Union Budget 2019, presented today by the honourable Finance Minister, Niramala Sitharaman has quite a few takeaways for the tourism industry. The government’s continuous commitment towards building a better physical and social infrastructure is a commendable gesture. Several initiatives which the government has undertaken like the Pradhan Mantri Gram Sadak Yojana, Bhartamala and Sagarmala projects, Jal Marg Vikas, industrial corridors and dedicated freight corridors are laudable and reflect how these infrastructural reforms will impact the tourism industry positively in the coming years. The UDAN Scheme which is designed to enable air connectivity to smaller cities is going to make air travel more accessible.

 

The INR 70,000 crore capital credit infusion for PSU banks should facilitate the growth of consumer credit and accelerate consumption of travel experiences. Also, the decision to develop 17 iconic tourism sites into world-class tourist destinations will further help in boosting tourism in those regions and at the same time serve as a model for other tourism sites in the country. The launch of railway station modernization programme this year will also attract more travellers and enhance railway travel experience. Crude oil prices have relaxed, however, the cost of Aviation Turbine Fuel (ATF) remains a concern as ATF constitutes around 35 % of the total operating costs of an airline in India, while globally it stands at about 25%.

 

Aditya Ghosh, CEO, India & South Asia, OYO Hotels & Homes

 

The budget breaks away from tradition and nudges the public and policymakers to think outside the brown briefcase. It sets a vision for the next decade for India with an intent to bridge the socio-economic and urban-rural divide. The boost to infrastructure, labour reforms, access to capital and talent for start-ups and MSMEs alike will drive productivity and consumption, which is also good news for the hospitality, travel and tourism industry.  The real test of this vision, however, will lie in its realization, which is essential to deliver on the government’s mandate of providing ease of living and ease of doing business. This will be possible only through concerted efforts from all stakeholders.

 

Subhash Goyal, Chairman ASSOCHAM - Tourism & Hospitality Committee

 

We are happy that for the first time in the history, the Finance Minister thanked the honest Tax Payers for paying their taxes regularly which is helping the economic growth of the country. This really made tax payers feel that the government is recognizing their contribution.

 

We also welcome the Finance Minister's statement that they will reduce Corporate Tax rates and include all companies with an annual turnover from Rs 250 crores to Rs 400 crores in the 25% tax bracket. This will cover 99% of Tour Operators & Travel Agents of India.

 

However, we are disappointed that nothing substantial about Tourism has been mentioned in the Budget. Although the Hon’ble prime Minister’s vision is to create millions of jobs and double the Inbound Tourism from 10 million to 20 million. If his vision is to be realized, then we need to increase Air Seat capacity in and out of India by atleast 15 million.

 

The industry demand of reducing tax on Aviation Turbine fuel to 1% should be implemented as the direct operating cost of tire Aviation fuel for an Airline is from 25 to 30%, that is why most of the Indian Airlines are bleeding. There has been an increase in the fuel which will make ground transportation more expensive aid also make movement of goods & services more expensive.

 

We as Tourism Industry were expecting exemption on GST and other Taxes based on foreign exchange earning as Tourism and Service Export contribute immensely to the Indian economy and are the largest job creators.

 

Sanjeev K Nayar, General Manager, ITC WelcomHeritage

 

The budget has talked about developing 17 iconic tourism sites, which we are  certain will benefit the hospitality sector and all other stake holders of the travel industry as this will create fresh demand of hotels and other tourist related infrastructure. We being a Heritage hotel chain are upbeat about this announcement and await complete details.

 

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