It has been over six months since the first case of coronavirus was detected in India, and almost four months since it was declared as a global pandemic by the World Health Organisation. A virus classified as ‘quite deadly’ stands to affect close to 50 thousand Indians, with above 10 thousand cases of recovered patients and over 2000 deaths. This is the largest pandemic to hit the globe in a century and that is why its impact is not solely concentrated on the health sector and its response but is most certainly going to involve a large toll on major sectors of economy including tourism.
The tourism sector in India is highly promising owing to the country’s visitor-friendly tradition, varied lifestyles, cultural heritage and festivals, along with intricate architectural marvels which attract tourists from all over the world. The Travel and Tourism Competitiveness Report, 2019, ranked India at 34 out of 140 countries. This report also ranked the price competitiveness of India’s tourism sector at 13 out of 140 countries. Tourism in India is immensely valuable to the country’s economy. According to the World Travel and Tourism Council, the tourism industry contributed Rs. 16.91 Lakh Crore that is 9.2% to India’s GDP in 2018. The same report also states that it provides 8.1% of the total employment opportunities in India. These numbers indicate that the tourism sector plays a significant role in the economic growth of the country. However, the onset and rapid spread of coronavirus in India has led to the shutting down of this vital industry.
Analyzing the Impacts
Financial Loss: It is estimated that the Indian tourism industry is projected to book a revenue loss of Rs 1.25 trillion in calendar 2020, i.e., a 40 per cent decline in revenue over calendar 2019, as reported by CARE Ratings. During April-June, a revenue loss of Rs 69,400 crore, along with a 50% drop in Foreign Tourist Arrivals impacting the Foreign Exchange Earnings (a vital source of revenue for the industry) will be seen. As per a report there has already been a decline by 65% in the hospitality sector of India in March, and at least 30% of hotel and hospitality industry revenue could be impacted, if the situation doesn’t improve by the end of June 2020. The F&B industry in India, with an annual turnover of approximately Rs 4 lakh crore, provides direct employment to more than seven million people. Zero revenue in the immediate term and a 50% drop in the following months will be observed. The biggest concern is the fate of the millions employed in this sector.
Unemployment: In the Aviation sector effects are observed on many of the airline companies that take aircraft on lease and have to pay regular money to the leasing companies irrespective of whether they fly or keep these aircrafts grounded. Continuation of the lockdown is likely to increase pressure on these companies forcing them to sack people. As another drawback of the lockdown, lakhs of people continue to lose their daily wages. It is argued that the consumer, retail and services (including tourism-based activities like travel agencies) will be affected in a big way and these sectors are set to lose at least 100,000 jobs which will include occupations such as, tour operators, drivers, guides, billing, customer service, operations and micro retailers. Specifically for the hospitality sector, the loss of jobs can amount upto 3.5-4 crores, as per the Hotel Association of India (HAI). The amount of daily wage workers like tour guides working independently with foreign and Indian tourists along with freelancers in the tourism sector who will be out of work with zero security, remains unaccounted for, though, it is not hard to imagine the number may lie anywhere between thousands to lakhs of people.
Fiscal Deficit: The Government has announced that $2 billion would be provided to strengthen India’s medical Infrastructure and treat patients infected by COVID-19, which is a huge unanticipated disbursement by the Government and given that many sectors are going to incur huge losses, revenue through taxes will be very less in this financial year, and might cause the country to fall into a fiscal deficit.
Drastic Behavioural Changes towards Foreign Tourists: The first cases of COVID-19 involving Italian tourists along with the majority of other cases continuing to be of those with recent travel history, have enhanced people’s fears and suspicions in places frequented by tourists. Therefore, there is a genuine sense of fear among people that foreign tourists might be carriers of the virus. As an impact of this reality, an environment of hostility may manifest against foreign tourists in India.
Addressing Policy Concerns
Encouraging domestic tourism: It is vital that the government takes the recovery of the tourism sector seriously after the pandemic is under control. The most immediate steps would be to reiterate encouragement regarding tourism among Indian citizens. This is where the app – Aarogya Setu can come in handy as it can not only keep an account of the number of healthy or infected people across different areas but a track on their movements may also be kept (an idea first implemented in China). Though this concept may seem invasive but in the long run, it can be extremely helpful as healthy individuals can be given incentives (like discounted prices, offers) for travelling. However it’ll be equally important to diminish any prejudices that may arise in the minds of citizens regarding foreigners. For this, the government should address these issues during public announcements and stress upon the avoidance of discrimination on any grounds. An added measure can be the establishment of a helpline service, which can sort through the needs or worries of citizens with regard to travel and tourism. This helpline will be crucial in dismantling any discrimination or negative behavioural patterns towards foreign citizens that may be an outcome of the ongoing pandemic.
The revival of domestic tourism will be the first step which would help safeguard occupations as well as bigger bodies in the hospitality sector.
Monetary support for losses in employment and businesses: In the likelihood of extension of lockdown procedures and increasing impacts of COVID on the tourism industry, the government can accumulate a stimulus package to stabilize and support the sector in the near future, including a workforce support fund to ensure that there are no more job losses. This might be the only way hotels can avoid layoffs even in the wake of further revenue losses. A moratorium of nearly 6 to 12 months on all loans, including working capital payments and overdraft provided by the government can also be extremely helpful in recovering from the extensive financial losses the industry is likely to experience otherwise. For the aviation industry specifically, heightened losses can be avoided by proposing to waive the parking charges, landing charges and airport charges for the next couple of months along with reduced Aviation Turbine Fuel (ATF) charges.
Fiscal support: To avoid falling into a fiscal deficit, the government may be suggested to provide a 12-month corporate tax holiday to the travel, tourism and hospitality sectors. A deferment of all statutory dues such as advance tax, custom duties, excise duties, PF, bank charges etc., at the Central and State level for 12 months can also prove to be significant in this regard.
Regarding the oncoming challenge with foreign tourism: Foreign tourism will be very hard to revive given the uncertainty regarding the end of the pandemic. Upon lockdown, around 4000 foreign tourists were stranded in India. To ensure foreigners will be willing to come back to India, it is vital for the country to maintain its visitor-friendly image. The suggested helpline for citizens can also play a key role in keeping a check on any discriminatory behaviour towards foreign individuals which may discourage them from visiting India. Once the pandemic subsides, incentivised travel services may be used to encourage tourists to visit India and help in increasing FTA (foreign tourist arrivals) and FEEs (foreign exchange earnings).
The ongoing pandemic and its impact is not likely to fade away in the near future. India is still in the midst of coping and assessing the impact of the virus and the number of cases are rising each day. Therefore, it is uncertain if complete normalcy can be obtained for all economic activities anytime soon. That’s why even though experts continue to evaluate the consecutive impacts of the virus on various sectors, the intricacies of the actual outcome will only be discovered with time. In the meantime, India’s economic revival policies must be strengthened to ensure that the country can be at a position where recovery may be difficult but certainly plausible.
By Twinkle Jaspal, Research Associate, Policy