GS Paper III

News Excerpt

Despite its diverse attractions, India faces obstacles in becoming the first choice for foreign tourists.

Potential and Prospect of India’s Tourism Sector

• Diverse attractions: The country boasts a rich tapestry of attractions, including iconic landmarks like the Taj Mahal, historical sites, pilgrimage destinations, and diverse wildlife sanctuaries.
• Economic impact of tourism: Travel and tourism (T&T) was projected to contribute $209.7 billion to the Indian economy in 2023, a little less than the $212.8 billion in 2019, according to the 2023 Economic Impact Research report by the World Travel & Tourism Council.
•  Challenges Post-Covid:  The sector was projected to contribute 6% to the GDP in 2023, 1% point less than in 2019. It shows that the sector did not recover fully from the Covid-19 period even in 2023.  
  •  And yet it was forecast to create more than 1.6 million jobs in 2023 to reach almost 39 million in emp­loyment and recover almost all the jobs lost due to the pandemic, said the report.
  • Around one in 13 workers in India are in T&T.
• Prospects of tourism recovery: India’s tourism economy will regain its pre-pandemic expenditure by 2024-25 with domestic demand driving growth. It is likely to grow by four times the pre-pandemic level by 2028-29, accor­ding to the study, “India and the Coronavirus Pandemic: Economic Losses for Households Engaged in Tourism and Policies for Recovery”

Challenges for India in becoming the preferred destination for foreign tourists

•  Taxation Hurdles: One significant roadblock is the comparatively higher tax rates imposed on the tourism sector, including GST rates on hotels, restaurants, cab fares, and tour operators.
•  Persistent High Rates:  Despite attempts by the GST Council to address concerns, these rates remain higher than those in competing economies, particularly in Southeast Asian countries.
•  Impact of GST and PoS Rules: The cascading effect of GST and the impact of Place of Supply (PoS) rules have led to increased costs for tour operators, making Indian tourism packages more expensive.
• Place of supply of goods under GST defines whether the transaction will be counted as intrastate or interstate, and accordingly, levy of SGST, CGST & IGST will be determined.
• Lack of International Promotion: The lack of aggressive international marketing efforts, especially in comparison to neighboring countries. In Southeast Asian countries like Malaysia, Thailand and Indonesia tourism is heavily promoted. Limited promotional activities by the tourism ministry contribute to India not being the first choice for foreign tourism operators.

Other challenges to India’s tourism sector:

•   Inadequate Infrastructure:  It is a major challenge for the Indian tourism sector. This includes hotels, connectivity with other cities, health facilities, and transportation etc. The major reason for this unconcern is a poor allocation of money in the budget.
•  Safety and Security:  Safety & security of tourists is the most important factor which governs whether people will come to that destination or not. Attacks on foreign tourists, especially on women tourists have raised this question.
•  Lack of Skilled Manpower: Another major challenge facing the tourism sector in India is the lack of skilled manpower. The industry requires skilled professionals in various areas, including tour guiding, hospitality, and travel management.
• Inaccessibility: There are many tourist destinations in the country, which are not accessible to poor, women and elderly because of the high cost of transportation.

Suggested Measures to Boost India’s Tourism

• GST Reevaluation for Competitiveness: A reevaluation of the Goods and Services Tax (GST) rates on the tourism sector is crucial. Lowering tax rates, especially on hotels and related services, will make Indian tourism packages more attractive and competitive.
•  International Marketing Initiatives: The aggressive international marketing campaigns, akin to those executed by competing destinations, should be implemented.
• For example- India can take cues from Thai­land, Vietnam and Malaysia, which offer 30-day free visas to boost foot­fall. China is adjust­ing its visa rules for European visi­tors to enhance numbers.
•  Active Promotion by Tourism Ministry: The tourism ministry must actively promote India as a global travel hotspot, leveraging iconic landmarks and diverse attractions.
•   Incentives for Digital Payments: Considering incentives such as GST refunds for tourists making digital payments can further enhance the appeal.
•  Boosting MICE Business: To boost international Meetings, Incentives, Conferences, and Exhibitions (MICE) business, leveraging ongoing government projects in connectivity, infrastructure, and the benefits of India’s G20 presidency is essential.

• Tailored Incentives for Travellers: Tailoring incentives for both national and global travellers- will play a pivotal role in encouraging them to explore India, contributing significantly to increased investment, employment, and the overall growth of the tourism sector.