The tourism and hospitality industry contributes significantly to the Indian economy and accounts for 9.2% of the country’s GDP. It employs close to 8.1% of the population, with the total contribution to forex at approximately USD 28 billion. The significance of the industry to the nation’s economic well-being cannot be emphasized as it indirectly provides employment opportunity to large sections of the population and helps put India on the global tourism map.
However, the unprecedented COVID-19 induced lockdown has brought the industry to a standstill. Uncertainty about how long the industry will take to revive has placed significant pressure on industry stakeholders specifically in regards to finances and cashflows, leading to friction between employers and employees. The entire value chain linked to travel and tourism industry is likely to lose around 5 lakh crore or USD 65.57 billion, with potential job losses to the tune of 2 crore.
The pandemic has put a furrow on the Indian travel and tourism industry as domestic and international airline companies are forced to cancel flights due to closed borders. This, coupled with the growing fear of contracting the virus while travelling has made people across the world put their travel plans on hold. The industry is expected to be up and running by the end of 2020, however, the estimates are dependent on the discovery of a cure or vaccine.
Recently CII conducted a survey to assess the potential impact of the pandemic and the resultant lockdown on the travel and tourism industry. The survey was conducted in Chandigarh, Delhi, Himachal Pradesh, Haryana, Jammu & Kashmir, Ladakh, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh.
According to the survey, close to two thirds of the respondents would like travel within 3 months of lockdown and travel restrictions getting over, and more than 70% of the respondents would prefer domestic travel, revealing the pent up demand that needs to be capitalised by the domestic tourism industry.
Close to 64% of the respondents have identified hygiene standards as the single most important deciding factor while selecting a place to stay at star-rated hotels. An overwhelming number of respondents have also identified their ideal tourism destination as a place abundant with nature, wildlife, hill stations and mountain ranges.
The pandemic has highlighted several areas that need to be immediately revamped to help revive the travel and tourism industry. Fiscal measures for sustenance in the short term and medium term is of the highest priority to enable the functioning of the industry. Extension of moratorium on loans till the end of FY2021, covering term loans, working capital loans, overdrafts and any non-fund based limits is of primary concern. This coupled with short term interest free loans for rebuilding businesses and immediate transmission to all industry segments is needed to ensure liquidity throughout the segment. A one-time re-structuring of loans from banks, FIs and NBFCs irrespective of the size of facility and under an existing framework is of utmost importance without requiring any reporting or provisioning for the lenders or rating downgrade for the borrower.
The Finance Minister’s recent announcement of redefining the criteria of MSMEs removed the distinction between manufacturing and services enterprises and made the investment amount and annual turnover similar for enterprises engaged in both travel and tourism. CII strongly recommends for consideration of the turnover criteria only, as putting a lower investment criterion discourages Indian entrepreneurs to invest the right capital for their businesses to grow to their future potential. This further allows certain brands of hotels to fall under the MSME criteria.
According to the survey, most people view tourism as a means of rejuvenation, which reveals that once the industry tides the current wave, potential opportunities will be just around the corner. In the post COVID-19 world, it is essential that we focus on several aspects that can spur the Indian tourism market and usher in a new era of growth.
The article first appeared in June 2020 issue of CII Communique. Click here to read the full issue.