Union Budget 2017: Ends remain loose for the tourism sector

Travel industry in India looking at Union Budget 2017 for a turn-around

While India still sluggishly recuperates from the radical demonetisation drive in November 2016, the travel and tourism industry anticipated good tidings from the Union Budget 2017.

The tourism industry in India is one of the largest contributors to the GDP and is a dynamic sector accounting for more than one-third of the total service trade in the world. While the World Tourism Organisation (UNWTO) expects the sector to provide 296 million jobs by 2019, the Indian travel sector was handicapped by the sudden demonetisation. However, after cash crunch affected major tourism states such as Kerala and Goa, the industry can now expect a revamped infrastructure in the country following Finance Minister Arun Jaitley’s budget presentation at the Parliament today.

In his closing speech, Jaitley remarked, “It is said when my goal is in sight, the winds favour me and I fly. There is no other day more appropriate than this.” Rail and road connectivity got a major shot in the arm at the budgetary presentation, but the major effects of the cash crunch that is still lingering in the tourism hubs of the country remained unaddressed in the budget speech apart from some structural reforms introduced to push the digital economy in the country.

Here’s what the President of India had to say before the Union Budget:

The Ministry of Tourism has identified a thematic circuit for the North East region #PresidentMukherjee

— President of India (@RashtrapatiBhvn) January 31, 2017

Railways and Roadways get special mention

If you look at the highlights of the Union Budget 2017, one can easily see the motive of the government to improve rail and road connectivity in the country. Travel and tourism depend a lot on connectivity and the recent budget envisages a strategic infrastructural development.

While presenting the budget, Jaitley reminded the nation that this is the first composite budget in independent India that included railways. He said that India is now in a position to synergise the investments in railways, roads, waterways and civil aviation. For 2017-18, the total capital and developmental expenditure on railways have been pegged at INR 1.31 trillion.

The provision for development expenditure on railways combines 3,500 kilometres of rail tracks, 500 stations for differently-able travellers, new ticketing facilities and a new metro-rail policy as major highlights. A total allocation of INR 3.96 trillion to infrastructure building includes a huge budget for the development of national highways and new amendments in the Airport Authority of India Act to enable proper monetisation of land resources.

Railway passenger safety and cleanliness in properties were also highlighted in the budget.

“Focus on railway security and up-gradation of services is expected to give a boost to rail tourism. Measures to control defaulters as announced in the budget was the need of the hour. Development of tier II airports through PPP mode will give a boost to the travel to and from these areas,” said Vishal Suri, Managing Director of SOTC Travel, formerly Kuoni Travel .

In his speech, Jaitley re-emphasised up on the government’s continuous endeavour to improve the Operating Ratio of the Railways. He informed that the rail tariffs would be fixed, taking into consideration costs, quality of service, social obligations and competition from other modes of transportation.

By 2019 all coaches of Indian Railways will be fitted with Bio-Toilets: FM @arunjaitley #Budget2017

— Ministry of Finance (@FinMinIndia) February 1, 2017

With the inclusion of the Railway Budget in the main Budget, government has been able to focus on development of the transportation network within the country in an integrated manner. The major plans as outlined by the Finance Minister on infrastructure development will help improve the service quality as well as bring in greater efficiency in the operations of our railways, ports, roads and highways,” said Pankaj Patel, President, FICCI in a release complementing the budget reforms.

India’s tourism outlook 2017

According to the data shared by the Ministry of Tourism between 2010 and 2015, it saw an 8.7 pc increase in total outbound trips to 19.9 million in 2015. The inbound tourist volume also grew at a Compound Annual Growth Rate (CAGR) of 6.8 pc during 2010-15. The tourism industry in India is not only about the travelling but also about a holistic development in the local communities and thus, the budget reforms demanded a better position of the sector in terms of Ease of Doing Business. As one of the major measures, Jaitley announced that the threshold limit for an audit of business entities that opt for presumptive income scheme will be raised from INR 10 million to INR 20 million.

“Tourism is an important part of the global economy and a significant employment generator. Five special tourism zones will be set up in partnership with the states. ‘Incredible India’s second campaign will be launched across the world. The government’s initiative on digitisation and governance is expected to improve transparency and ease of doing business; it is a positive for the formal sector,” added Suri.

.@mci1972_mahesh – Focus on digital payments a welcome move. @PTI_News #Budget2017

— Thomas Cook India (@tcookin) February 1, 2017

Reacting to the budget presentation, the President of Outbound Tour Operators Association of India (OTOAI), Guldeep Singh Sahni said, “Total disappointment.  The govt did not bother to look at anything to enhance tourism in and out of the country. The taxation on us is benefiting those who are selling from overseas.”

Calling some of the decisions ridiculous and talking about the unjust circumstances the tour operators in India are facing, Sahni added, “On one side the government is creating passport facilitation by having GPOs accepting applications. On the other side, there is no relief on tourism. It is because of the fault of those who did not file returns, tour operators are being punished.”

Indian tourism and allied industries have evolved as key drivers of development, employment, and contributors to the GDP. Tourism in India has significant and yet underleveraged potential considering the country’s rich historical, cultural, social and geographical inheritance. Only time will reveal whether Union Budget 2017 will re-instil faith and prosperity in the evolving digital economy of India and boost the travel and tourism sector.