Tourism - A Sector With Potential

Vineet Taing, President, Vatika Business CentreOffering a perfect blend of modern amenities, dedicated SPOCS, a strong business support system, and the best of technology, Vatika Business Centre enables you to focus on your business. The office spaces are ergonomically designed and optimized for productivity, positions at top-notch buildings across 9 prominent cities of India.

Discussions on the performance of the Indian economy have been happening for many months now. The many years and cycles that our economy has been through, right from liberalization in the early 1990s have shown that in order to grow at a healthy pace and sustain that growth year after year, no single sector can operate in isolation. From being recognized as a predominantly agrarian economy in its early days, we have seen various sectors develop, contribute and help grow the overall economy. This is exactly what Pahle India Foundation's report titled `An Integrated Value Chain Approach to Ease of Doing Business: A Case Study of Sugar, Alcohol Beverages, and Tourism Sector' points towards.

The 3 sectors that the report covers includes Tourism. Having been in this space for years, the synergies pointed out by the report among the other two sectors; sugar and alcoholic beverages with that of tourism have remained largely unexploited. States like Kerala and Bihar which have an immense potential for tourism (in fact it is one of the most important sectors for Kerala) have been battling broader policy issues like ban on alcohol. Kerala quickly realized the effects of the ban and reversed it, two years after it was imposed in 2015. Why a ban on alcohol is detrimental to the success of the tourism sector is self-explanatory, especially when one considers foreign tourists visiting India. Consider this; Bihar lost over Rs 3000 cr in excise revenues in a year after alcohol ban; tourism down too. If that sounds like a big issue, here is a smaller one. Among the many licenses that are required today to start a hotel, one is for washing clothes! There are close to 70 such license requirements which are a burden on the industry. The estimate made in the report that the Indian hotel industry has the potential to grow to USD 424 bn by 2027 points to a clear need to rationalize policies across sectors in order to harness that huge potential.

Reforms on the Ease of Doing Business front have been very generic so far. There are many challenges that need to be overcome for the industry to realize its potential. The interlinkages between alcoholic beverages and the tourism industry are evident in states practicing prohibition in India. Presently, Gujarat, Nagaland, Bihar and the Union Territory of Lakshadweep practice prohibition on alcohol. Bihar introduced a ban on alcohol in 2016 and has witnessed a decline in the number of domestic and international tourists within one year. According to data from the state tourism department, the number of domestic tourists in the state was approximately 61.52 lakh in 2015 which in 2016 decreased to 42.84 lakh. But the biggest loss to the exchequer has been the drop in excise collections.

If tourism is to be made business-
friendly, the government needs to introduce sector-specific reforms. This is necessary, as tourism as a sector has strong interlinkages with other sectors and industries such as food services, hospitality, retail, travel, real estate and others. Tourism as a sector comes with direct, indirect and induced benefits and each sector plays a role in the growth of tourism to sustain such benefits. There is a need to bring down the in-coherence in the status of tourism and its regulations in the country. In Schedule 7 of Article 246, tourism is not listed under the Concurrent, Union or State list. Each state has its dedicated tourism board which is responsible for overlooking the promotion and development of tourism.

From the perspective of ease of doing business, recognizing the need to upgrade tourism infrastructure in India, the central government has proposed an outlay of INR 152 billion for the tourism sector. From an Ease of Doing Business (EoDB) perspective, the states have a bigger role than the center.

The Indian hotel industry has the potential to grow to USD 424 bn by 2027 points to a clear need to rationalize policies across sectors in order to harness that huge potential.

As the report points out, the tourism sector today faces various challenges not just with respect to the value chain but also in the services and infrastructure. Some of these include an ineffective single-window clearance and extended time periods for clearances and licenses. To make things simpler we need to further enhance the efficacy and implementation of the government skill development program and it is here that we as stakeholders would have to support the efforts of the government.

For an industry which is the seventh-largest in the world, with respect to its contribution to the GDP of the country, the World Travel and Tourism Council (WTTC) report of 2018, has pegged the tourism sector to grow to USD 424 billion (INR 29,680 billion) by 2027. Presently it accounts for USD 234 billion (INR 16,380 billion) i.e. 9.4 percent of India's GDP. For the industry to achieve its true potential, a conducive reforms program will have to be implemented on the lines of what the report is suggesting.

The PIF report makes seven recommendations mentioned in the table alongside the tourism sector which I believe are extremely critical from the point of view of what I have said so far. Ideas like the creation of the Investor and entrepreneur interactive platforms (competitions, fairs, summits) in small cities are the need of the hour. The quick and transparent licensing process is another important need and enforcing stricter timelines a necessity.

Enhancing ease of doing business is a challenge, but policy initiatives in the right direction are a necessity, especially considering the tight ropewalk that the government is going through for ensuring that the economy remains on track and in the right direction. An integrated approach to ease of doing business as encapsulated by the PIF report is probably the right step in that direction.

List of Recommendations for Tourism Sector
List Tourism under the concurrent list which will result in a more definitive approach to policymaking on all aspects of tourism.

Assign a nodal ministry/department to ensure a more uniform policy environment for the sector.

Put in place a medium and long term vision plan and policy document for the sector.

Introduce uniformity in terms of the licensing regime in at least each state, if not amongst all states.

Bring in the uniformity of licensing of eateries across states by defining different kinds of eateries by the FSSAI.

Bring in leniency in issuing excise licenses to on-premises outlets as they are important for both leisure and MICE tourism.

Bring in strict timelines for the issue of licenses by seeking a response on requests within a prescribed time period.

Revamp the single window clearance system to ensure that the purpose of such a system is truly met. An efficient online application and tracking system needs to be put in place to ensure approvals are granted in a timely manner.

Improve the quality of content and training in government institutes by employing a collaborative approach using the PPP model.