How the Union Budget impacts Indian travel trade

If there is one thing that makes the Indian travel trade stand out from other industries is their eternal optimism, and this is good for the NDA 2.0 regime, which has now promised big upgrades to a nation that’s developing at a faster pace.

Although many in the travel and hospitality sectors are of the opinion that the Union Budget 2019 presented by Finance Minister, Nirmala Sitharaman has failed to give a fresh impetus to the industry that’s bringing in more revenue to the nation’s coffers, they are pinning their hopes on newer announcements and upgrades that might change the face of Indian travel trade in the next few years.

The responses to Union Budget 2019 were both positive and skeptical. Many opine that while the government has addressed key concerns like liquidity, FDI, employment, infrastructure development, and environmentally responsible growth, it has still not levied GST, or granted infrastructure status to hospitality and convention centres, which are huge drivers of MICE tourism in India. Fortunately, the budget did address the development of iconic sites. Sanjeev K Nayar, General Manager, ITC WelcomHeritage, pointed out that this will give the much-needed impetus to the hospitality sector. “The budget has talked about developing 17 iconic tourism sites, which we are certain will benefit the hospitality sector and all other stakeholders of the travel industry, as this will create fresh demand of hotels and other tourism-related infrastructure. Being a heritage hotel chain, we are upbeat about this announcement and await complete details,” said Nayar.

Though progressive and policy-driven with long-term results, hotels were disappointed with the budge’s refusal to address GST. “The budget should deliver positive results in the long term. However, we are disappointed to see the Tourism & Hospitality sectors having been mostly ignored. We are still hopeful that the GST Council will review and bring down GST for hotels from the present 28% to at least 18%,” said Vineet Verma, Executive Director & CEO, Brigade Hospitality Services Limited.

Seconding his opinion, Anil Kumar Prasanna, CEO, AxisRooms, said, “This is a supplementary budget, though the expectations with regards to lower and single slab GST was not met for the hotel industry and a very conservative approach adopted. There is a small win on MSME loans and Mudra loans for women. NRI investments in equity would be a boost for the start-up sector. Additional 1.5 Lakh exemption on home loan would benefit the common man. MSME loans though taken up in this budget is still a suspect in process and transparency is it applicable to tech industry and how the benefits would be delivered to them is still not clear.”

However, it is clear that growth is a priority for NDA 2.0, opines Madhavan Menon, Chairman & Managing Director, Thomas Cook (India) Ltd.“Steering away from taking a populist approach, the government has taken a long-term view on revitalizing the Indian economy. With this budget, the government has addressed the key fundamental challenges like liquidity, FDI, employment and infrastructure development. It has also focused on enhancing the role of AI, robotics, technology which will lead the nation on the path to be future-ready and benefit employees and workforce, at large. The lowering of corporate tax (25%) up to companies with a turnover of 400 crore is a welcome move especially to MSMEs and social enterprises. The effort is clearly on environmentally responsible growth, thereby living up to our promise of sustainable development,” said Menon.

He also stated that it is encouraging to see the focus being given to the aviation industry. “The Finance Minister’s announcements on FDI, aircraft financing and leasing, policy interventions for the development of maintenance, repair, and overhaul in India (MRO) have provided the much-needed support to the industry, and will certainly have a multiplier effect on airfares and job creation. With the government’s UDAN scheme being further fortified by the inclusion of additional smaller airports, it will augment regional air connectivity, thereby generating an increase in inbound and domestic tourism. A noteworthy initiative is the setting up of 17 iconic tourism sites as world-class tourist centers, coupled with a Digital Repository as a bank of documentation on India’s tribal history and heritage. A focus on overall transportation infrastructure with far-reaching initiatives such as Bharatmala for roads and Sagarmala for waterways, along with massive rail modernization and safety will have long-term positive outcomes for the country,” he added.

Seconding his view, Mahesh Iyer, Executive Director & Chief Executive Officer, Thomas Cook (India) Ltd, said, “The maiden budget of NDA 2.0 clearly seeks to mobilize resources and open up investments through increased FDIs in insurance, aviation, and media sectors among others. We are optimistic about the long term roadmap towards addressing liquidity concerns as well as the corporate tax reduction. The emphasis on rejuvenating the aviation sector through FDI in finance, leasing, and MRO, is a much-needed step in the right direction. The tourism sector stands to gain significantly from the modernization of railways and aggressive budgetary outlays towards infrastructural schemes like Bharatmala, Jalmarg, and Sagarmala. The second phase of UDAN will further enhance regional air connectivity between India and Bharat, making travel affordable and accessible across the country. A visionary inclusion from a transportation perspective was the announcement of the inter-operable One Nation-One Card. We see these initiatives bridging the urban-rural divide and also significantly bolstering growth in the sector. A noteworthy announcement was that of a Digital Repository of tribal heritage with the aim of preserving rich tribal art and culture and promoting it. We also applaud the government’s plans to develop 17 iconic tourism sites as world-class tourist centers. Showcasing the grandeur of the country among tourists, this will also position the country as a key destination for visual attractions. Clearly, tourism is being viewed as an important growth driver of the economy,” he said.

The budget’s emphasis was also on the development of the aviation sector. “Aircraft financing and leasing is an important step towards making the Indian aviation market more self-reliant. A regulatory ecosystem in this area will help boost India’s role in the segment and also have a positive impact on the air passenger growth which lost momentum this year due to capacity issues. Creation of additional tourism sites is a positive move that will have a long term impact in boosting tourist inflow and enhancing the overall visitor experience. Setting up a digital repository of architecture, traditional art, and folk dances, is an excellent way to showcase our country’s rich tribal cultural heritage and promote authentic and ethno-tourism,” said Aloke Bajpai, CEO & Co-founder, ixigo.

On the railways initiative, Rajnish Kumar, Co-founder & CTO, ixigo, said, “The initiation of PPPs is a milestone step for railways to push faster growth in terms of investment, operating efficiency and modern clean technology. It will also help the sector to reduce operating and maintenance costs and boost quality and innovation. This move will draw keen interest from players like us who would be willing to partner with the government to work towards better railway services.”

Rakshit Desai, Managing Director, FCM Travel Solutions, Indian Subsidiary of Flight Centre Travel Group, said that the government’s continuous commitment towards building a better physical and social infrastructure is a commendable gesture. “Several initiatives which the government has undertaken like the Pradhan Mantri Gram Sadak Yojana, Bhartamala and Sagarmala projects, Jal Marg Vikas, industrial corridors and dedicated freight corridors are laudable and reflect how these infrastructural reforms will impact the tourism industry positively in the coming years. The UDAN Scheme which is designed to enable air connectivity to smaller cities is going to make air travel more accessible. The INR 70,000 crore capital credit infusion for PSU banks should facilitate the growth of consumer credit and accelerate the consumption of travel experiences. Also, the decision to develop 17 iconic tourism sites into world-class tourist destinations will further help in boosting tourism in those regions and at the same time serve as a model for other tourism sites in the country. The launch of railway station modernization program this year will also attract more travelers and enhance the railway travel experience. Crude oil prices have relaxed, however, the cost of Aviation Turbine Fuel (ATF) remains a concern as ATF constitutes around 35 % of the total operating costs of an airline in India, while globally it stands at about 25%,” said Desai.

Rituparna Chakraborty, EVP & Co-Founder, TeamLease Services, explained that the budget is modern in its presentation and makes a strong and ambitious statement as it lays down India’s vision of being a $5 Trillion dollar economy. “The budget is directionally aimed at building a social economy and each of the 10 points has ingredients for future job creation. Rural India, Women empowerment, Start-ups, Electric vehicles, Education, Skills, Make in India, Infrastructure, Employment-generation, Ease of doing business. Enabling employment creation extends to multiple dimensions – tax incentives, digital focus,  infrastructure development, promotion of sunrise sectors, empowering MSMEs and social enterprises and sops for higher education to name a few. Extending the Stand up India scheme until 2025, 2% interest subvention for GST-registered MSME on fresh or incremental loans, clearance of loans up to Rs 1 crore for MSME within 59 minutes and payments through an online portal reduce the hassles faced by the MSME,” said Chakraborty.

“In addition, the four labor codes, changes in corporate taxation, simplification of GST filing, impetus in infrastructure, banking, aviation will have an impact on formal job creation. While we see impetus in high-end skill-building capabilities, it has no mention of possible investments to be made in building vocational skills. The expectation was to see more large-scale structural reforms but it has emphasized on the right steps in taking forward some of the reforms initiated in the Modi 1.0. I hope the implementation of the decisions taken is done with choreographic precision to maximize the benefits for the economy.”