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Impact Of COVID-19 On Tourism In India
For the tourism industry, this is an excellent time to develop a common safety and sanitation standard for hosting and serving its customers.
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The COVID-19 pandemic has probably been the most devastating of financial and social crisis of recent times, leading to suspension of almost all economic activity and forcing a country wide lockdown. While the INR 20 lakh crore economic recovery has assuaged some apprehensions, some sectors that have been more affected than others, and sectors that could help with economic recovery have been overlooked.
Tourism, which contributes 5.06 per cent in India’s GDP (2016-17) is one such industry which has been ignored in this recovery package. The ongoing pandemic, travel restrictions, and the country wide lockdown have brought the entire tourism industry to a standstill, and unlike other sectors, tourism will take longer to recover, especially leisure tourism. This will have a direct impact on states like Uttarakhand, Rajasthan, Kerala, Himachal Pradesh, Goa, Sikkim and other north eastern states which depend extensively on tourism as a source of state revenue.
The Indian tourism industry employs 8.75 crore people (12.75 per cent of the total employed population in 2018-19), such as people from the hospitality industry, tour operators, travel agents, homestay owners, drivers, guides, small traders, artisans and craftsmen among a host of other service providers. The sector also has strong forward and backward linkages to other sectors such as agriculture, transport, handloom, and FMCG to name a few. Disruptions in tourism sector will render many people in unemployed. The food and hospitality sector is already reeling under pressure from high fixed costs and no footfalls. FAITH, a policy federation of associations of tourism and hospitality industry has estimated a loss of Rs 10 lakh crore for the industry due to COVID-19. This will also impact inflow of foreign tourists, which means a drastic fall in foreign exchange earnings which was close to Rs 2,10, 981 crore in Q1-Q3 2019. India is yet to address the concerns of the tourism sector.
Interestingly, the global scenario is completely different. The EU has provided benefits in the form of liquidity support, fiscal relief, and easing of state aid rules for those in the tourism business and is currently considering a tourism recovery plan. Italy, one of the worst country to be affected by COVID-19, has recently announced a four billion euros bailout package for tourism and will incentivise domestic tourists to holiday on home soil. The French government too has announced an eighteen billion euros “Marshall Plan for Tourism” bailout for tourism. Similarly, South Africa has initiated a relief package of approximately $11 million exclusively for MSMEs in the hospitality and tourism sector. Indonesia has announced a $725 million stimulus package in order to revive its tourism and civil aviation industry, with additional tax waivers to hotels and restaurants in select regions. Countries such as US, UK and Singapore too have initiated focussed efforts to revive tourism. India’s lack of focus on tourism and its conspicuous absence from the recovery package is both surprising and disappointing. Even more so when the government has been paying particular attention to the sector these last six years.
First, like all MSMEs, those in the tourism sector will also require access to credit, of which, most vulnerable are the own account enterprises (OAEs). In order to improve the flow of credit to this sector, tourism must be included under priority sector lending (PSL). Furthermore, under the category of MSME for PSL, a separate sublimit for OAEs must be created to ensure that credit flows to the smallest of small businesses. Second, the central government should consider tweaking norms under tourism infrastructure development schemes so that states may utilise funds under such schemes to develop health and safety infrastructure to ensure nil or minimum chances of transmission of communicable diseases in future. For e.g. funds under PRASAD may be used for developing health and safety measures at religious destinations. Third, the Government should consider supporting the hotel and restaurant industry by subsidising their fixed costs. Additionally, applications and renewal of licencing fees should be absolved for atleast a year and kept at minimum for the next two years for all such businesses. Similarly, transfer of licence should be made seamless so as to bring ease of doing business in the industry. Fourth, state governments should consider waiving certain critical charges such as property tax and interstate transport taxes for a fixed period of time. Electricity and water charges for homestay owners should be billed at residential rates instead of commercial rates. Fifth, all state governments should look to create a state run e-commerce platforms, replicating the GEM model, which will allow for showcasing and sale of state specific cottage industry products and provide the necessary market connect to consumers. State governments must also think of ways to incentivise domestic tourists to boost local tourism.
For the tourism industry, this is an excellent time to develop a common safety and sanitation standard for hosting and serving its customers. The industry must also utilise this opportunity to adopt ecological waste disposal practices and adopt environment friendly day to day practices.
It is quite evident that the tourism sector in India needs a redoubled and renewed push for its revival in the post COVID-19 world. The government must consider an immediate recovery package and plan that focusses on the tourism sector, not just because it is one of the worst affected, but also because it is arguably the largest source of employment and source of income for many MSMEs.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.
Arindam Goswami is a Research Fellow with Pahle India Foundation (www.pahleindia.org), New Delhi. His interests are in the domain of financial sector, gold and precious metal commodities, and domestic trade.More From The Author >>
Nirupama heads research at Pahle India Foundation. Her interests are in finance and economy, defence economics, MSMEs, internal trade and commerce.More From The Author >>