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Budget Push to Tourism an Eye-wash, says Hospitality Industry

For the first time in recent history, the government has announced tourism as one of its four pillars for growth, raising the hopes of Indian hospitality sector.
But the new provisions in Budget 2014, however, dampened their spirit as they resemble mostly those in previous years. “The government failed to give hospitality any notable relief and stimulus for growth,” said JLL honcho Arun Chitnis. “Despite its 6.6% contribution to the GDP and the fact that it created close to 40 million jobs in 2012-13, the Indian hospitality sector continues to be a story of neglect from our policy makers.”

Even today, India receives only about 0.5% of the global tourist arrivals despite being a country rich in history, culture, natural splendour and diversity, he said. The fact that it has still not been equipped to receive a better share of global tourism receipts is puzzling and frustrating, he said.

What Was Delivered

  • The budget gave tourism some mention and indicated plans for long-term growth by way of developing India’s pilgrimage and heritage tourism circuits (PRASAD & HRIDAY schemes) and also provided for the development of a world-class convention centre in Goa via the PPP route. While these are welcome initiatives, these provisions will take between five to ten years to impact the growth of domestic and international tourist travel.  
  • The introduction of electronic visas and visas-on-arrival initiated earlier this year can be a major game-changer for Indian tourism with respect to foreign travel into India. 
  • The time-bound directive to implement e-visas at nine major airports within six months is perhaps the best news that this budget has delivered. This can have far-reaching consequences once implemented.
  • The improvement and modernisation of railways, proposed new airports of international standards and the thrust on improved road connectivity augur well for the hospitality industry. These along with other policy announcements regarding increased FDI in several sectors and clarity on setting up of REITS, are catalysts for growth.

What Was Ignored

  • The sector is desperately in need of incentives in Tier 2 and Tier 3 cities to make hotel investments there reasonably attractive 
  • The sector also needs better borrowing terms through the infrastructure lending route, and relaxed ECB norms 
  • The sector needs to be spared from double taxation through service and luxury tax/VAT at the state and centre levels. Indian hospitality was looking forward to rationalisation of taxes and ease of raising capital.  
Since the Indian hospitality sector is still trying to shake off the lingering effects of the serious downturn it has been experiencing for almost six years, say industry sources.
As no economy can hope to achieve and maintain any degree of sustainable growth and buoyancy without its tourism and hospitality sector being given the necessary importance and corresponding stimuli, the industry is upset over the budget provisions this year.
In short, from the perspective of the Indian tourism hospitality sector, Budget 2014 failed to deliver. The industry must continue to survive primarily on the basis of die-hard optimism that it will eventually be given its rightful importance at the policy level, says Arun Chitnis of JLL India.

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