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Union Budget 2020-21: A mix bag for Indian tourism industry

Saturday, February 1, 2020, 22:07 Hrs  [IST]
HBI Staff | New Delhi

The Union Budget for 2020-2021 presented by Finance Minister, Nirmala Sitharaman was a mix bag for Indian tourism.  While Indian tourism industry would be an indirect beneficiary of the overall focus on infrastructure spending by the government, the Budget failed to address many long-pending demands as well as lacked any new direction for the industry at a time India’s foreign tourist arrival growth was at its lowest this year in the last decade. 

Many industry watchers expected announcements like Visit India Year to shore up the overseas marketing and promotion of Incredible India backed up by adequate allocation for destination marketing.  Nothing of that was there in the Budget speech.  The domestic tourism industry expected some announcements to incentivise domestic travel to mirror Prime Minister’s Independence Day speech advising people to visit at least 15 domestic destinations.   That also didn’t find place in the Budget.

The Hospitality industry in the country has been harping on the demand for Infrastructure Status for the industry for quite long for hotel projects beyond a ticket size of INR 50 cr., that didn’t favour with the FM this year also.  The expectations were high this year considering NITI Aayog’s New India @75 strategy paper had stressed on the aspect and recommended infrastructure status for tourism and hospitality industry.

However, the industry welcomed various proposals of the Budget to increase the infrastructure spending, steps to create iconic destinations, the proposal to extend grant to States to viable proposals for destination development by States, the proposal to introduce Tejas trains to connect tourism destinations, proposal to set up 100 new airports, etc.

The allocation for Tourism and Culture Ministries has also seen some enhancement in the Budget 2020-21. The allocation for Tourism Ministry has gone up from INR 2189 (Revised Estimate INR 1416 cr) to   an estimated INR 2499.83cr this year. 

HOSPITALITY BIZ gathers the reactions of the industry experts on the Budget proposals:

Dr Sangita Reddy, President, FICCI
Given the constraints that the Finance Minister was facing, this has been a comprehensive statement. The government has done a commendable job and the various measures announced will strengthen India, individuals and industry. By invoking the deviation clause in FRBM Act and relaxing the fiscal deficit to 3.8 per cent in the current year and targeting 3.5 per cent in the next year, the government has underscored its resolve to support the economy at a time when it needs a fiscal boost. This was FICCI’s key suggestion to the government and through this we expect more money will be left in the hands of the people that will spur consumption and industrial growth. Much of this money will go towards capital expenditure in infrastructure and agriculture sector – two areas that can have the maximum growth enhancing impact. The significant move of putting more money in the hands of people is visible by: a) Personal income tax reduction; b) Rural and Agri push.  

Jaideep  Ghosh, Partner, Travel, Hospitality and Leisure, KPMG in India
 Overall, continued emphasis on infrastructure, energy, education, healthcare will boost the economy over a long term. National Infrastructure Pipeline projects worth US$14 trillion, if implemented on a timely basis, would be a game-changer. Special focus on technology, connectivity and digital areas are very timely. As far as tourism and hospitality sectors are concerned, continued emphasis on investments in transport infrastructure, education and digital areas would boost tourism and hospitality sector, which currently faces challenging economic situation. Grants to states for specified tourism initiatives, development of heritage sites and museums are welcome steps. Would expect the investments proposed in tourism, however, to be upped in the coming years. 

 Madhavan Menon, MD, Thomas Cook India Ltd.  
The Union Budget has seen encouraging focus intended to give impetus to the Travel & Tourism sector with the allocation of INR2500 Cr, equally critical allocation of Rs 1.7 lakh crore towards transportation infrastructure in 2020-21; setting up of 100 additional airports by 2024 and doubling of aircraft as part of the unique Udaan scheme to further boost regional connectivity and ensure affordability; 2000 kms of strategic highways and Tejas equivalent trains to connect iconic tourist destinations. A far reaching and long term initiative that I truly welcome is the Finance Minister’s announcement that an Indian Institute of Heritage and Conservation will be set up with the status of a deemed university, and this is an imperative towards education and skill development of our sector that contributes a significant 10% to India’s GDP; additionally playing a critical force-multiplier role in job creation-accounting for 26.7 million jobs in 2018 and expected to provide employment to nearly 53 million people, directly and indirectly by 2029. India’s Foreign Exchange Earnings (FEE) grew by 7.4% to Rs 1.88 lakh Cr during 2020-21, and the announcement of specialised grants to states will give much needed fillip towards tourism focused initiatives on a pan-India basis. 

Rajesh Magow, Co-founder and CEO-India, MakeMyTrip  
Increased allocation of funds for the Ministry of Tourism and Ministry of Culture, development of financial roadmaps for tourist destinations and plans to assign specified grants for states will go a long way in accelerating the contribution of the sector towards India’s economy. Additionally, development of five iconic archaeological sites across Haryana, Uttar Pradesh, Assam, Gujarat and Tamil Nadu comes as a strategic step towards boosting domestic and inbound heritage tourism to these states. An impressive infrastructure push through increased budget allocation for transport infrastructure across national highways, railways, airports and seaports is welcome and will definitely boost connectivity and access across metros, non-metros and tourist destinations. The introduction of Tejas-like trains for tourist destinations, development of 100 more airports under the UDAN scheme and initiatives to improve Wi-Fi facilities across railways stations will act as a stimulus to accelerate contribution of transportation to the travel & tourism industry. 

 Puneet Dalmia, Managing Director, Dalmia Bharat Group The FY21 Union Budget has focussed on rejuvenating economic growth with multiple nuts and bolts measures. It is evident that the government has chosen to take focussed steps and provide sector specific boost, keeping the compulsions of fiscal deficit in mind. At the same time, a lot now hinges on the government’s ambitious National Infrastructure Pipeline programme that aims to attract investments of over INR100 lakh crore in the next five years. If the 6,500 identified projects are executed well, this one single programme has the potential to significantly alter the Indian landscape, create lakhs of jobs, provide robust business to ancillary industries like steel and cement, and prime the broad economy. It is now imperative that the government gets down to immediately rolling out the fine print of this gigantic infrastructure push so that projects can take off in right earnest. 

Ankur Bhatia, Executive Director, Bird Group 
Budget 2020 has given the Indian tourism and hospitality sector the much needed shot in the arm by allocating Rs 2500 crore for developing the sector. The Budget proposal to develop 100 more airports and introduction of more Tejas type trains to boost supplementary infrastructure is also welcome. The decision to develop five more archaeological sites would also surely increase both International and domestic tourist inflow. The number could have been proposed much more than just five considering the wide array of decrepit historical sites in the country crying for development. While we welcome these development-oriented announcements, the hospitality industry was also expecting a full-blown infrastructure status for the hotel sector and further rationalization of Goods and Services tax (GST) on hotel rooms. Infrastructure status for the hotel industry can alleviate the funding woes the sector is currently staring at, as liquidity with the mid-sized hotel players has almost dried up. In absence of seamless debt flow, equity alone will not suffice. 

 Vijay Dewan, Managing Director, Apeejay Surrendra Park Hotels Ltd and Chairman of CII West Bengal State Council It's a balanced budget, where government has taken measures by allocating INR 2,500 crores for tourism promotion in FY21 in order to support the Incredible India initiative. The vision of government to invest in the tourism sector will be a great push for the hospitality sector. India's heritage and culture rich experiences have always attracted tourists to the country and government's plan to develop five archaeological sites at iconic sites with on-site museums will attract more tourists from India and globally. The plan to develop 100 new airports will significantly help in building tourism infrastructure and will drive tourism growth. 

Vishal Suri, Managing Director, SOTC Travel 
The Budget 2020 announced measures to further boost and create a momentum in the overall tourism sector. The proposal of 100 additional airports by 2024 as per the UDAN Scheme, introducing more Tejas-type trains which will help connect tourist destinations and the overall allocation of INR 1.7 lakh crore for transport infrastructure in 2020-21, will revitalise the untapped and unexplored destinations in India. The new personal income tax regime would put higher disposable incomes in the hands of the individuals, by allowing an option of a lower rate regime if all exemptions (including investment linked exemptions) are foregone. This step would induce consumer spends and inevitably help consumption across sectors, especially tourism. 

Sonica Malhotra, Joint Managing Director, MBD Group
It is a holistic budget which caters to all segments of the economy primarily education, health & women welfare, infrastructure and agriculture. What is heartening to see is that the government has put a lot of emphasis to boost the tourism sector. Announcement such as development of archaeological sites and world class museums at five identified sites and allocation of INR 2,500cr for tourism promotion will not only further enhance the country’s ranking on the Tourism Competitive Index but will also generate huge employment opportunities and give a big boost to the spread of our rich culture and heritage all across the world. Also, the development of 100 more airports under UDAN scheme by 2024 and construction of 12 more highways will further boost connectivity and provide significant boost to the tourism and hospitality sector.

 Roop Pratap Choudhary, Managing Director, Noor Mahal This budget is certainly a booster for the promotion of India’s heritage, tourism, and rich cultural diversity. This will provide flourishing ground for Hospitality Sector. We welcome the move of the Finance Minister towards the creation of a robust infrastructure by announcing the development of more than 100 airports till the year 2025. This will allow the new and offbeat destinations to emerge and grow at a faster rate. Announcing Rakhigarhi, Haryana amongst the five archaeological sites with on-site museums would also put Haryana now on the map of the international travellers. Tejas like trains on the cards to connect iconic destinations will certainly inspire new tourism concepts and avenues. Rs 2500 crores allocation for the promotion of tourism industry would further strengthen the sector and help in generating more employment opportunities. Although a more liberal and reasonable investment and loan framework were expected from this budget, we hope in future, a more flexible and tolerant financial environment from the government to give small hospitality players to explore more growth avenues. 

 Gaurav Dewan, COO and Business Head, Travel Food Services 
The Government's focus on development is clear and reinforced with the allocation of additional funds to the Airport, Railway and the Highway sectors. This will boost business and leisure travel thereby generating employment, connectivity and overall economic development of catchment areas. This commitment towards tourism sector through allocation of INR 2500 crores, infusion of INR 1.7 lakh crores in infrastructure sector, doubling of aircraft fleet and enhanced focus on cultural tourism among other aspects, is bound to create a multiplier effect on inbound traffic to India, thereby propelling the travel retail economy to further growth. With digitisation and infusion of positive funds in the economy, we look forward to rubber hitting the road in the days to come..

Sanjeev Nayar, General Manager, WelcomHeritage Group
Union Budget 2020-21 has emphasized on the growth of the tourism sector. Initiatives like adding 100 more airports by 2024 under the Udaan scheme will help to improve connectivity across the country and manage to cater the significant growth in the number of flyers thus giving impetus to the burgeoning domestic travel. WelcomHeritage being a heritage hospitality brand has always supported the developments that can benefit the cultural heritage of India and by allocating Rs 3,100 crore to Cultural Ministry, we expect more promotion of India’s vast rich culture and heritage. The government is also looking to develop five archaeological sites as iconic sites with on-site museums in Haryana, UP, Gujarat, Assam and Tamil Nadu, which is a good move, which will attract the tourists across the world. 

 Vineet Verma, CEO & Executive Director, Brigade Hospitality Services Limited. 
With the allocation of 2,500 crores in the tourism budget, and the State governments being requested to develop tourism roads maps, which the centre will support is very encouraging. For tourism is one of the largest employment generators and has the potential to place India among the top 5 tourism destinations in the world, the announcements made at the Union Budget will have a significant impact on the overall growth of the sector. And, we welcome the move to identify and develop new destinations but it is critical that we also focus on improving connectivity and infrastructure at our existing locations.  

Rohit Malhotra, CEO, Jay Jay Capital and Investment Pvt Ltd 
Budget 2020 was more focused on development. Government has allocated additional funds for the promotion of tourism and transport services - like airport, railways, highway sectors. This will boost the travel and hospitality industry and will generate employment, connectivity and will result in inbound traffic to India. Due to the proposed tax slabs, there will be an increase in the disposable income which will channelize further economic growth. We are hoping that the economic situation will improve in the near future and will be beneficial to the hospitality industry. 

 Pranav Maheshwari, Co-Founder, Vista Rooms 
The budget definitely provides a holistic approach to the tourism sector. The expectations were quite high in terms of further GST reduction but the union budget has completely neglected it. The positives would be the initiative to develop 17 iconic tourism sites into world-class tourist destinations resulting in more foreign tourists, benefitting the hospitality sector as well as other stakeholders of the industry. Also, the proposed transport and social infrastructure backed by digital platforms will further boost tourism. The steps to promote the rich tribal heritage and its culture will encourage tribal arts, crafts, fashion and architecture leading to generating better revenues and presence on the world map. The tax burden on employees due to tax on employee stock options to be deferred by 5 years or till they leave the company or when they sell, is good but it would be only applicable to successful start-ups. This is something which start-up community has been asking for complete abolition till the exit.

 Sarbendra Sarkar, Founder & Managing Director, Cygnett Hotels and Resorts 
The government's push for infrastructure development by building more airports and as also the announcement of new Tejas trains will boost tourism outside the main centres. this, in turn, will have a positive impact on the hotel sector. We are building hotels in many new locations and with this kind of infrastructure development we will surely be a gainer.

Priyanka Lakhani, Regional Commercial Director, Collinson India
The announcement of 100 new airports by 2024 under the UDAN scheme is a welcome move and is great news for India’s aviation sector. The news is especially encouraging for Collinson, the operator of the world’s leading airport lounge programme, Priority Pass, as it further cements our July announcement to triple our investment in India to redefine the airport experience.  With more people travelling than ever and more state of the art airports coming into the fold, we will ensure our lounge portfolio growth is unrivalled, and that we continue to deliver the best experiences through the airport for our millions of customers. Recent Collinson research told us that 86% of our Indian respondents already enjoy the airport experience (a stark improvement to the global average of 63%). With this budget announcement it is important to not only focus on the airport infrastructure itself, but also to understand that it is the different components of the customer’s journey through the airport that drives not only the customer’s spend but also their overall satisfaction with their journey.

Ravichandran Purushothaman, President, Danfoss India
The budget restores our confidence for agriculture and allied industries to increase their contribution to GDP in coming days. With the expansion of NABARD refinance scheme and extension of Agri-credit to Rs 15 lakh crores, there definitely is a greater scope to address the industry’s challenges at a grassroot level. The ability of states to fuel infrastructure support in tandem with the push for increased cold chain infrastructure for agriculture, horticulture, dairy and fisheries will be key to tackling the food loss in our country.

With efficient implementation, the Kisan Rail and Krishi Udaan schemes will be helpful in buckling down the overall cost within the farm-to-fork process, thereby driving profitability for farmers and reducing prices for consumers.

Additionally, the vision to double our milk capacity to 108 MT tonnes by 2025 and raise fish production to 2 lakh tonnes through FFPOs will help in building a new ecosystem of start-ups across the agri and allied sectors and thereby help create newer job opportunities in the nation. Overall, the budget this year certainly brings in exciting times ahead as we look forward to great advancements in our rejuvenated ecosystem.

Ramesh Ramanathan, CMD, Sterling Holiday
We are pleased with the proposed budget, as it will play a pivotal role in the hospitality and domestic tourism sector, and will have a multiplier effect across the board. We are also happy with the Budget’s focus on tourism, wherein a total of Rs 3,100 crore has been set aside for the Culture Ministry in FY21, and five archaeological sites will be set up with museums on-site in Rakhi Gadi in Haryana, Hastinapur in UP, Dholavira in Gujarat, Shivsagar in Assam and Adichanallur in Tamil Nadu, along with a tribal museum to be set up in Ranchi, Jharkhand, and a Maritime site in Lothal. With INR 2,500 crore being allocated for tourism promotion, the domestic sector will receive the desired boost.

In addition, the allotment of 1.7 lakh crore for transportation and proposal for more transport facilities including 2000 km strategic highways along with Tejas Express -type trains, and 100 more airports to be developed by 2024 to support the Udaan scheme will make access to more locations easier. The golden quadrilateral will also work towards making travel in India feasible, whilst improving connectivity.  Further, a total of INR 3000 crore allotted to skill development will facilitate employment generation, especially creating opportunities for the skilled youth of the country.

Jurgen Bailom, CEO & President, Jalesh Cruises

We welcome the government's initiative to allocate INR 2500 crore for tourism promotion. Being one of the key drivers of growth and the third-largest forex earner for India, this initiative will further create employment growth and strengthen the tourism industry at large. We believe that India is poised for a quantum leap in the space of tourism which will contribute to the GDP growth in the coming years.


Pushpendra Bansal, Managing Director, Lords Hotels & Resorts

Presently, hoteliers have to run from pillar to post in order to obtain the required licences and registrations. Single window clearance for licensing should be introduced to promote ease of doing business.  Allocation of 2500 crores for tourism industry will definitely help in development of infrastructure which is need of the hour. GST should be reduced further on room tariffs to encourage more inbound and outbound tourism mainly for FIT's.

Arjun Raj Kher, Brand Head of Hitchki and Bayroute

There has definitely been an increase in the budget allocation for the Tourism and Hospitality industry, from INR  1416 cr in FY 19 to INR 2500 cr this fiscal year, but since this is one of the fastest growing industry, there could have been a better announcement.  Some positive changes have also been announced such as concession in corporate tax rate, which will be beneficial, help us to remain competitive in the market and also help create maximum employment. A proper budget has also been set aside for food processing sector, which will boost the rural economy.

Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI) & President, Hotel & Restaurant Association of Western India (HRAWI)

This Union Budget, like the preceding Budget has neglected the Hospitality industry. While the budget allocation of INR 2500 crore for the Tourism sector sounds like it may translate to spill-over benefits for the Hospitality sector, we don’t have sufficient information about where or how the funds will be used. The increase in the number of trains, such as, Tejas, to iconic destinations has the potential to boost travel but alas is vague. The construction of 100 airports is also an encouraging announcement but unless infrastructure is boosted nothing will take place.  

We have been expecting reforms in rate slabs of GST, Input Tax Credit (ITC) and a definitive step to boost the domestic and inbound traffic. It has been our long-pending demand to include Tourism in the concurrent list which has not seen the light of the day, nor has Hospitality been given infrastructure status. Unfortunately, none of the concerns of the industry has been addressed in this budget.

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