After being bracketed as a vital sector by the new government in its election manifesto, the Indian tourism industry is looking forward to a positive year with the Narendra Modi-led Government keeping its promises. An industry that, for so many years, was being neglected and ignored by the Government, with only a short-lived cite in the previous Budgets, the focus on tourism in the Union Budget 2014-15 came as a huge sigh of relief. Lauding the new Budget, industry stalwarts have termed it as practical and well planned.
In the Union Budget 2014-15, Finance Minister Arun Jaitley announced an allocation of Rs. 500 crores for the formation of five new tourist circuits in the country. In addition to the new circuits, Sarnath-Gaya-Varanasi Buddhist circuit will be en suite with world class tourist amenities. Jaitley further announced the launching of National Heritage city Development and Augmentation Yojana (HRIDAY), in conjunction with academic institutions and the local community, for the conservation and preservation of heritage characters in cities such as Mathura, Amritsar, Gaya, Kanchipuram, Vellankani and Ajmer on a tourism budget of Rs. 200 crores. Rs. 100 crores has also been allocated for archaeological sites’ maintenance. To boost religious tourism, Jaitley has announced the setting up of national mission on pilgrimage, rejuvenation and spiritual augmentation drive (PRASAD).
To push tourism even in tier I and II cities, Jaitley announced a scheme for the development of new airports in those cities to be launched through the Airport Authority of India or Public-Private Partnerships (PPPs). The Minister also announced that e-visa will be introduced at nine airports across India to encourage inbound tourism.
The service tax issue has been controversial, but this year the budget proposed service tax exemption for inbound tour operators. Further, in response to the request of the tourism sector, services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India, has been taken out of the tax net and CENVAT credit for services of rent-a-cab and tour operators has now been allowed by the Government.
The proposal to expand sea port and airport infrastructure will further enhance travel infrastructure in the country in the coming years. The home constituency of the Tourism Minister, i.e. Goa, will benefit from the international convention centre proposed through PPP mode with government support by Viability Gap Funding (VGF).
Giving an impetus to infrastructure, new tourism circuits and easy visa regimes, the sector is expected to get a much-needed push after a sluggish performance last year. While the Rail Budget ensures an efficient transport system in the country, the Union Budget acts as a blue print for economic recovery by recuperating the investment norms in the country and warming up to select sectors of the economy for FDI and domestic private investment.
Keeping in mind the government’s emphasis on travel and tourism in this year’s Budget, the industry’s faith in the Union Budget has been restored. Experts believe that this government has shown the enthusiasm to use travel and tourism to promote inclusive growth, as this sector contributes roughly 7 per cent of India’s GDP and helped create over 40 million jobs last year.
Connecting the world to Indian culture and traditions
Stressing on the nation’s cultural, historical, religious and natural heritage, the Finance Minister opined that the sector provides immense potential for development and employment opportunities.
Praising this move, Peter Kerkar, Director, Cox & Kings opined that the thrust on pilgrimage and heritage tourism with emphasis on Buddhist tourism circuit centered on Gaya in Bihar will enable India to attract this segment of tourists from South East Asia, Japan and Sri Lanka. “The proposal to earmark a sum of Rs. 100 crores to revive heritage tourism will lead to development and promotion of new tourism circuits. The proposal to develop five more tourism circuits will enable India to broad base its tourism offerings, which till today is concentrated on a few circuits,” he said.
Sharing his sentiments Madhavan Menon, Managing Director, Thomas Cook (India) stated that the Government’s pro tourism focus also sees manifestation via key initiatives announced in the Budget highlighting India’s culture, heritage, arts, traditions and much more.
Building five tourist circuits will not only help channelise domestic tourist traffic, but also boost tourism infrastructure development while generating employment and speeding economic progress for the region. Vikram Malhi, Managing Director, Asia, Expedia further added, “This motion helps the tourism industry build a strong base of domestic tourism and will put India on the map as a niche culture and heritage destination. The proposal of ‘Namami Ganga’ will help preserve our country’s heritage, which constitutes a major part of India’s tourist attractions.”
This year’s Budget is a blessing in disguise for the tourism industry, said Jyoti Kapur, President, Association of Domestic Tour Operators of India (ADTOI). “The need of the hour is new products, destinations and circuits. Although the new Budget has proposed funds, the amount is not at par with the financial backing needed for infrastructure development. But this is a huge step forward and ADTOI welcomes the Budget and hopes that this will lay more importance on the growth of tourism.”
According to Neelu Singh, COO, Ezeego1.com, the Budget’s proposal to create five tourist circuits around specific themes is likely be a big boost for the development of tourism resulting in creation of several new jobs within this industry. “Development of the Sarnath-Gaya-Varanasi Buddhist circuit with world class tourist amenities, along with development of archaeological sites of national significance, will attract tourists from all over the world and significantly augment pilgrimage and heritage tourism,” she added.
Welcoming the world with open arms
Another step taken by the Government to boost inbound numbers to India is the new visa regime. Electronic travel authorisations (e-visa) for countries have been identified and will be introduced at nine airports in a phased manner with infrastructure support in the next six months.
Implementation of the new e-visa scheme for international tourists at nine airports will increase inbound tourism, thus increasing foreign exchange earnings, opined Zakkir Ahmed, President, Travel Agents Federation of India (TAFI). “The Government identifying tourism as a major industry in the Union Budget is a very positive sign for industry. As a member of the industry this year’s budget came as a huge surprise, especially the e-visa scheme,” he said.
While there was no ‘big bang’ announcement, according to Ashwini Kakkar, Executive Vice-Chairman, Mercury Travels, the one thing that is exciting is ETA or e-visa at nine airports in the country. “While the previous government had initiated e-visa, the new government has put a time frame of six-month to implement it and this should help boost inbound tourism.”
Subhash Goyal, President, Indian Association of Tour Operators (IATO) is sure that international tourist arrivals to India will grow by 30-40 per cent on a yearly basis once the e-visa is introduced. He further believes that this will also generate additional direct or indirect employment for 50 million people and a substantial increase in foreign exchange earnings.
Agreeing with Goyal, Sarabjit Singh, Vice Chairman, Federation of Associations of Indian Tourism & Hospitality (FAITH) said that he was delighted to know that the Union Budget has paid heed to the association’s demand of the implementation of e-visa. “While the first step has been taken in this interim budget of developing tourism, we plan to associate more closely with the Ministry of Finance for the next Budget for incorporating further suggestions.”
The decision of introducing e-visa in a phased manner at nine airports will present the much needed boost to the tourism sector, said Jagat Mehta, Acting President, Enterprising Travel Agents Association (ETAA). “This will help in bringing in investments from foreign airlines as well for generating employment.”
Connecting Cities
The Union Budget 2014-15 proposed plans to develop more airports through the PPP model, especially in tier-II and III cities. Experts believe that this will open up opportunities for the aviation sector. “New airports will allow domestic carriers to reach out to newer markets, and help international airlines expand their footprint in India through code-share agreements,” said Menon.
Malhi opined that developing new airports through PPP mode in tier-II and III cities is progression and will increase domestic air traffic. The next generation of aviation growth in India is expected to be triggered by regional airports, he added.
“There are a host of measures that have been announced like infrastructure development in terms of airports in tier-I and II cities, development of 16 ports, smart cities, highways, rail connectivity and much more. This will only generate more employment and hence more disposable income,” shared Kakkar, further adding that connecting smaller cities will help tourist inflow and put India on the tourism map.
The topic of debate: Service Tax
The service tax issue has been controversial, but this year the Budget proposed that services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India be taken out of the tax net and CENVAT credit for services of rent-a-cab and tour operators be tax exempted so as to promote tourism.
Akshay Kumar, President, Adventure Tour Operators Association of India (ATOAI) termed this Budget as optimistic and progressive. “This year the Government has acknowledged the tourism industry and provided sops. We are happy that finally some of our demands are met. The fact that service tax has been waived off for foreigners travelling to other countries through Indian operators offering CENVAT credit for tour operators makes life a lot easier.”
“We are happy that our demand for extension of CENVAT credit of service tax paid by rent-a-cab operators and tour operators has been met. We are optimistic that our request pertaining to air travel agents, bringing service tax under the ambit of Reversed Charge Mechanism will also be met in the future,” shared Sunil Kumar R, Acting President, Travel Agents Association of India (TAAI)
Exemptions from service tax is a step towards sustainable growth within the sector, said Rajeev Wagle, MD, Kuoni India. But the exemption of service tax for broadcast and online advertisements and print advertisements also holds importance to travel and tourism companies.
“It provides several opportunities for effective marketing undertaken by tour operators and tourism boards. This will help tap the prospective within the outbound market,” he added.
Growing businesses with India
Ponda, Goa will soon be a Meetings, Incentives, Conferencing and Exhibitions (MICE) tourism hub. This decision follows the Budget where the Finance Minister allocated funds to make Goa the MICE tourism hub of India.
The move to develop an international convention centre in Goa is great as India can then attract huge conventions and conferences that do not consider India at the moment, said Kerkar. He further opined that this segment does not consider India as an option as the country does not have world class convention facilities. “Goa is the ideal venue with its air and rail connectivity and this will encourage more air traffic to the destination.”
Echoing these thoughts, Neelu Singh added that the decision to develop an international convention centre in Goa can put the city on the map as an attractive MICE destination, in addition to being a leisure tourist’s hot spot. “This will also change the notion wherein people do not consider India as a MICE option owing to lack of world class convention facilities.”
“I am very pleased that the government has taken measures to increase the inflow of foreign exchange through inbound tourism by focusing on infrastructural development. Destinations like Goa already draw a high share of foreign tourists, building a world-class convention facility will also help attract a larger share of MICE to the country,” said Kumar R.
Hospitality sector: The Budget disappoints
After the optimistic Union Budget for tourism, it has been very disappointing from the hospitality point of view and has been unsuccessful to meet expectations. Experts believe that while tourism was supported and taken care of, the hospitality sector was completely neglected.
S M Shervani, President, Federation of Hotel and Restaurant Associations of India (FHRAI) explained that the hospitality industry is disappointed that no tax relief or other specific incentives have been proposed for the sector.
“As tourism was identified as one of the five priority areas, we were expecting that the government’s budget would take crucial steps to update the sector’s multiple tax regime, which has been the primary obstacle deteriorating India’s tourism industry. With the development of new tourism circuits and better air connectivity to tier-II cities being planned, the Government should have simultaneously reduced minimum project cost in order to build budget and mid-segment hotels. However, we applaud the initiative to set up a Rs 10,000 crores fund to provide equity, soft loans and other forms of risk capital for start-up companies,” he added.
“Though the Union Budget has cemented the development of tourism in India, the hospitality sector that functions as its base has been completely mistreated. Not a single sop was given for development of the hospitality sector. But the future looks bright and I am sure that the Government will soon realise that we are an integral part of the industry. We expect similar support in the future,” said Kamlesh Barot, Immediate past President, Hotel And Restaurant Association of Western India (HRAWI).
