FM’s Budget fails to address travel trade concerns

Finance Minister Nirmala Sitharaman’s latest budget for the fiscal year 2024-25 has introduced a series of measures with far-reaching implications for India’s tourism industry. As a sector deeply affected by economic policies and global trends, tourism stands to gain significantly from the government’s strategic focus on infrastructure, tax incentives, and sustainable development.

Infrastructure Boost

A major highlight of the 2024 Budget is the 20 per cent increase in infrastructure spending, with ₹6 lakh crore allocated for various projects. This substantial investment is set to benefit the tourism industry directly by improving connectivity and enhancing travel experiences. Upgraded airports, better road networks, and expanded railways will make travel more convenient and attractive, potentially boosting both domestic and international tourism.

The budget also earmarks funds for the development of new tourism circuits and the modernisation of existing ones. This focus on creating and enhancing tourist attractions will likely stimulate interest and increase footfalls in lesser-known destinations, helping to distribute the economic benefits of tourism more evenly across the country.

Tax Incentives and Reforms

The budget introduces several tax reforms aimed at promoting business growth, including a reduction in corporate tax rates for small and medium-sized enterprises (SMEs) from 25 per cent to 22 per cent. For the tourism sector, which comprises many small and medium operators, this reduction could lead to increased profitability and the ability to reinvest in enhancing services and expanding operations.

Additionally, the budget proposes tax incentives for companies involved in eco-friendly tourism practices. These incentives are expected to encourage investments in sustainable tourism, promoting practices that minimise environmental impact while enhancing the appeal of India’s natural attractions.

Focus on Sustainability

A significant portion of the budget, ₹1 lakh crore, is allocated to green energy and sustainability projects. For the tourism industry, this translates into potential funding for eco-friendly initiatives, such as green-certified hotels and sustainable travel packages. Emphasis on sustainability aligns with global tourism trends where travellers increasingly seek environmentally responsible options.

The focus on sustainability is also likely to boost India’s reputation as a responsible tourism destination, attracting eco-conscious travellers and positioning India as a leader in sustainable tourism practices.

Rural and Cultural Tourism

With ₹2.5 lakh crore allocated for rural development and agriculture, there is an opportunity for the tourism sector to benefit from improved infrastructure in rural areas. Enhanced road connectivity, better facilities, and increased investment in rural attractions can help promote rural and cultural tourism. This could lead to a rise in visits to heritage sites, rural homestays, and local festivals, diversifying the tourism offerings and creating new revenue streams.

Challenges and Fiscal Management

The budget projects a reduction in the fiscal deficit to 5.5 per cent of GDP, with a focus on disciplined expenditure management. While the increased infrastructure spending is promising, careful implementation will be crucial to ensure that funds are effectively utilised for tourism development. The tourism industry will need to monitor the progress of these initiatives and advocate for continued support to address any emerging challenges.

The 2024 Union Budget reflects a commitment to enhancing infrastructure, promoting sustainability, and supporting business growth, all of which are poised to positively impact the tourism industry. By improving connectivity, providing tax incentives, and investing in eco-friendly practices, the budget lays a solid foundation for revitalising and expanding India’s tourism sector. As the country implements these measures, the tourism industry can look forward to increased opportunities for growth and development, contributing to India’s economic prosperity and global standing as a premier travel destination.

Quotes from Industry leaders –

Rajiv Mehra, President, IATO

The recent budget has overlooked the vital tourism sector, which is disappointing for all stakeholders. Despite its potential to generate significant revenue and employment, tourism has not received the attention it deserves. This neglect could hamper our efforts to attract more inbound tourists. We urge the government to recognise and invest in this key industry. A focused approach is crucial for revitalizing and sustaining tourism in India.

Jyoti Mayal, President, TAAI 

TAAI highlighted that the sector, a key driver of economic growth and employment, remains underfunded and neglected in the latest budget. While the FM emphasised infrastructure development for a few religious locations, TAAI noted that these areas require significant investment and connectivity improvements. Instead of enhancing existing popular locations and ensuring last-mile connectivity, the government is focusing on less accessible sites with limited interest from both domestic and inbound tourists.

Naveen Kundu, Managing Director of EbixCasH

“As the Managing Director of EbixCash, I am deeply concerned about the government’s approach to tourism in the latest budget. Allocating only 33 crores to a sector as vital as tourism is both disappointing and inadequate. This modest budget suggests a lack of genuine commitment to transforming India into a global tourism hub. While neighboring countries like Thailand, Malaysia, Singapore, and Hong Kong are actively investing in strategies and incentives to attract tourists, we seem to be stuck in a cycle of meetings and minor initiatives. It’s essential for our tourism strategy to move beyond discussions and into actionable plans that offer real incentives for international tourists. To truly harness the potential of tourism, we need a robust, well-funded approach that aligns with global best practices and competitive strategies. Without this, our ambitions for tourism will remain unfulfilled.”

Mr Rikant Pittie, Co-Founder, EaseMyTrip

“The government’s attempt in positioning India as the global tourist destination is evident in the Union Budget 2024-25. Demonstrating efforts to promote religious tourism and domestic tourism infrastructure. With special focus on Bihar, Nalanda, and Odisha, the government plans to develop the iconic religious sites to support its infrastructure and transform them into world class pilgrim and tourist destinations. We are optimistic that this will enhance the overall experience of the tourists visiting these religious sites and will uplift the state tourism.

Additionally, the government has also shown interest in simplifying taxation in cruise business by proposing a presumptive taxation for cruise ship operations in India. This initiative aims to encourage foreign cruise owners to operate in India, thereby providing a significant boost to cruise tourism in the country.”

Sandeep Arora, Director, Brightsun Travel, India

We welcome the 2024 budget, especially the focus on boosting spiritual tourism which not only honours the country’s rich cultural heritage but also opens up new avenues for travel and tourism. The special focus on Bihar and Odisha will see extensive development and promotion of religious and historical sites such as Bodh Gaya, Rajgir and Nalanda. Odisha also has a great potential as a destination for religious and beach tourism. The new initiatives to improve infrastructure and connectivity in these offbeat destinations will attract both domestic and international tourists, offering a much-needed boost to the local economy.