Budget 2021: Expectations of the travel and tourism industry
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
With the advent of the holiday season in December 2020, leisure travel had gradually started gaining momentum in India.
The travel and tourism industry was amongst the first-hit due to the COVID-19 pandemic and will probably be amongst the last to realise full recovery. UNTWO’s report estimated a loss of $1.1 trillion to the international tourism industry in the calendar year 2020. The sector’s losses in India can be estimated to Rs 125 lakh crores, as per CARE Ratings. As a sector whose contribution is projected to hit 9.9% of the country’s GDP before the end of this decade, a concrete roadmap is required to revive the beleaguered industry and help it emerge stronger in the post COVID world.
With the advent of the holiday season in December 2020, leisure travel had gradually started gaining momentum in India. The announcement of the new COVID guidelines coming into effect from February 1, 2021 will introduce big changes which are further expected to bolster tourism. With relaxations in religious, cultural and social gatherings, exhibition halls and permissions to operate swimming pools in hotels; we already foresee a strong recovery in religious, business as well as leisure travel segments in the upcoming months. The pent-up demand growth and the declining number of COVID cases combined with the government’s impetus to the industry in the Union Budget 2021 will ascertain an exponential recovery in the near future.
The revival of domestic tourism
Although the vaccine administration has begun across India, it is unlikely to reach the larger population before mid-2021. Moreover, the international travel picture still remains vague with the speculations of mandatory vaccine certificate requirements to obtain visas to some countries, particularly the US and EU nations which have been severely hit by the second wave of coronavirus with high case count. Consequently, international leisure travel is expected to remain largely inaccessible in 2021 much like the last year. However, due to the pent-up travel desire, people are now inclined towards leisure travel, with more and more international travellers now turning towards domestic travel for their long-pending retreats and ‘revenge travel’ plans. The timing is just about right for the domestic travel boom that the country has been waiting for!
With safety still taking the front seat, the domestic travel pattern is currently determined by the distance of the destination from home as well as the various safety offerings during commute and stay. Which is why nearby, offbeat destinations that are accessible by short road trips are taking precedence over popular tourist destinations.
Evidently, a similar pattern is being witnessed in the $50 billion Indian wedding industry. With a majority of the weddings scheduled last year stalled to 2021, the affluent couples are looking forward to lavish yet compact weddings to be organised at the nearby ‘unconventional’ destinations as safety still remains the foremost deciding factor.
The advantages of these offbeat destinations are two-fold. Firstly, a boost to the local economy including more sales/businesses in hotels, tourist attractions, restaurants, local art, handicrafts and more which would act as accelerators to help realize the government’s Atma Nirbhar Bharat and Make in India initiatives. Secondly, ensuring the reduced risk of infection as these destinations are lesser-known and hence, less crowded.
Expectation:
As per CARE ratings, India stood 10th worldwide in terms of its annual spend on travel and tourism in the year 2019. The Tourism Ministry’s budgets have, in fact, previously been slashed over the last few budgets to a meagre 1500 crore. In order to spur domestic tourism and make India a world-class tourist destination, we expect that the budgetary allocation is at least increased by 50% to 2250 crore in this budget.
Allocation of funds for road infrastructure
Due to the shift in travel preferences of people post COVID, 2021 is dubbed as the year marking the return of the classic road trips. The onus to make it a success is on the country’s road infrastructure that facilitates full scale and last-mile connectivity. Moreover, if an economy aims at promoting domestic travel, its road connectivity plays a pivotal role.
Investments in the road infrastructure, especially for the remote towns and villages would be a prudent choice to promote local tourism while simultaneously ensuring risk-free travel. This would align well with the government’s vision to build a self-sustained economy creating jobs in smaller towns thereby supporting the local travel and hospitality sector.
Expectation:
The total expenditure on the Ministry of Road Transport and Highways for 2019-20 was around Rs 90,000 crore, growing at a healthy trend over the last 5 years. We would anticipate this to continue and hope that the allocation hit the Rs. 100,000 crore mark in the upcoming budget.
Extend support to the nascent EV industry
Over the last couple of years, the government has been promoting the electric vehicles industry in keeping with the growing consciousness towards environment and energy conservation. Having witnessed a steep decline in pollution levels during the lockdown phase, the vision has not seemed more plausible until now. 2021 seems like an opportune time for the government to focus on achieving a clean, green and sustainable future for the country.
Expectation:
To encourage green commuting, the government needs to focus on the manufacture, infrastructure as well as adoption of electric vehicles in India. Addressing the major challenge faced by the electric vehicle manufacturers could be the solution – reconsidering the 18% GST input on components/raw materials and providing attractive subsidies.
Another bottleneck corresponding to the EV adoption is the lack of associated infrastructure such as charging and battery swapping stations. With Tesla entering the Indian market, it is expected that the upcoming budget will allocate funds for setting up EV infrastructure which will increase its adoption and penetration PAN India.
Focus on religious tourism
In India, pilgrimages and holy sites rank significantly high among the preferred tourist destinations of people, including the lower classes. Religious tourism was severely hit as the prominent religious attractions such as Vaishno Devi, Golden Temple, Tirupati, Shirdi and Siddhivinayak temples remained largely shut during most of the previous year.
Expectation:
As religious travel is expected to soar in 2021, the government should allocate a large pool of funds for the up-gradation of on-premise infrastructure like ticket collection centres, ATMs, cloakrooms, lodging and toilets in these establishments of worship.
In conclusion
The travel and hospitality industry is one of the largest revenue and employment generators in the country. The industry seeks to support and simultaneously holds faith in the government to help the industry emerge from the disruptions caused by COVID-19 and return to normalcy soon.
It will be safe to say that if the budget addresses the subjects of domestic travel, road infrastructure, electric vehicles and religious travel by allocating necessary resources and funds in the upcoming budget, the contribution of travel and tourism industry towards India’s GDP can increase from 6.8% to 10% in the FY 2021.
-by Gaurav Aggarwal, Founder & CEO, Savaari Car Rentals.
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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow