A desperate Indian travel and tourism industry looks to the budget for relief

What the sector needs
What the sector needs
Image: REUTERS/Sunil Kataria
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The travel and tourism industry was without a doubt one of the worst-hit during the course of the Covid-19 pandemic in 2020 and 2021, and reeling back from the effect of the pandemic has by no means been easy. While most industries started to regain momentum in the later months of 2021, the travel and tourism industry, which has witnessed one of the highest contractions since the pandemic, continues to face innumerable disruptions even now.

While the government had introduced a slew of measures and stimulus packages last year to support the industry, the sector needs more long-term revival measures as it continues to be disrupted by new variants, covid guidelines and restrictions. With trillions of dollars in losses experienced all over the world, measures that can aid the travel sector have become more crucial than ever. As a sector that contributes significantly to the annual GDP, it is essential for the travel industry to bounce back, not only for its profitability but for the stability of the Indian economy on a broader spectrum.

With the upcoming budget, we are focused on three main areas for the revival of this industry: income tax benefits, incentives, and investments. Policies that work within these three pillars can vastly support the industry and ensure that structural changes are brought.

Tax benefits in Budget 2022

The tax rates imposed on the hospitality and travel industry have been persistent and standardised through the course of the pandemic, despite reduced revenue earned by the sector. With the industry facing huge losses since the outbreak of the pandemic, a tax waiver for a few years could be explored for a strong resumption of the sector.

Low-interest working capital loans, flexible mortgages, creative financing options, and non-refundable subsidies can be highly beneficial.

There is also a dire need to rationalise GST and revise it based on the current ecosystem of the industry. Additionally, providing Tax Deducted at Source (TDS) tax relief to travel industry stakeholders can also support industry players.

However, while these could be temporary breathers, what we need are measures more permanent and adaptable to unforeseen concerns in the future.

Incentives for the travel industry

The pandemic has taught us that unwinding is a key part of one’s overall physical and mental health. Keeping this in mind, the budget should look at reviving the travel sentiment by providing travel stimulus packages and tax incentives for personal and corporate travel.

With the current pent-up travel demand, a reduction in personal income tax rates will place more money in the individual’s hands, which then can accelerate the growth of the sector. A set of reforms that considers this key aspect can take the sector and overall well-being of citizens to new heights. Providing income-tax exemptions for travel, and increased leave travel allowance can make travel more affordable, thereby bringing positive travel sentiment.

The pandemic has highlighted the tourism potential of the country, and the need of the hour is to unlock this potential through a budgetary focus on infrastructural development, connectivity enhancement, and promotion of domestic travel experiences.

Additionally, providing incentives for states to spend more of their budget on short term infrastructure and connectivity enhancements can aid tourism, especially in tier 2 and 3 cities.

Granting infrastructure status to the tourism industry can provide several benefits to the sector and further strengthen the industry. This can play a significant role in improving the health of the sector and lead to growth in investments.

Boosting investment capacity

An increased focus on developing safety infrastructure across tourist spots can also boost travel confidence. Increased focus and investment in capacity building and training of stakeholders in the industry is also needed to ensure a safe recovery.

Structural reforms focused on enhancing digital infrastructure and technology can also be a game-changer.

With the slow recovery faced by travel and tourism, its investment potential has witnessed drawbacks. This will continue unless the union budget puts forward effective incentives.

While the budget can introduce reforms, the key is to ensure these measures can be structurally implemented on a short-term basis for immediate recovery.

The union budget is a valuable opportunity for the government to address the crisis in the sector and strengthen its contribution to the economy. While there are disruptions, there is also strong pent-up demand for travel. With the right reforms and measures, we are confident that the sector will bounce back strongly this year.

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