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Contrary to popular perception that international tourists bring in all the lucre it’s actually domestic travellers who set the cash registers ringing

Tourism along with travel is one of the largest service industries in India estimated to be worth over $200 billion in 2018. However being one of the most contact-intensive and socially active sectors tourism has been among the hardest hit by the Covid-19 pandemic. The consistent rise in the number of infections and mortalities and consequent protection measures like lockdowns quarantines and curtailment of travel through most of 2020 and the first half of 2021 wrought havoc on the industry.

The criticality of the tourism sector for India’s economy is evident from the fact that it directly contributed an estimated 2.7 per cent to GDP and 6.7 per cent to the employment of the country in 2019-20. And if the indirect shares of related services were to be included in these estimates the corresponding shares would go up to 5.2 per cent and 15.3 per cent respectively. These numbers are also substantiated by international assessments of the vast economic potential of one of India’s sunrise industries. And we are talking of really large numbers.According to the estimates based on the structure of India’s Third Tourism Satellite Account prepared by the National Council of Applied Economic Research (NCAER) tourism is expected to have exclusively generated Gross Value Added to the tune of Rs. 5.18 lakh crore (or $70 billion) and supported nearly 34.83 million jobs in India in 2019-20.

The latest Travel and Tourism Competitiveness Report (TTCR) released in 2019also ranked India 34th out of 140 countries overall. As per this report India improved its ranking in tourism competitiveness by six places in just two years which was the greatest improvement among the top 25 per cent of the countries ranked. The TTCR which is published by the World Economic Forum ranks selected nations according to the Travel and Tourism Competitiveness Index which scores from 1 to 6 the tourism-related performance of a given country in three sub-indices viz. regulatory framework; business environment and infrastructure; and human cultural and natural resources.

In view of these remarkable growth figures achieved by the tourism industry in recent years Covid-19 has undeniably acted as a huge dampener. Although tourism has seen a marginal revival post the decline in Coronavirus cases after the ebbing of the second wave during April-June 2021 the emergence of the latest variant of the virus Omicron again threatens to neutralise the gains of the last few months for the industry. In this context it is important to take stock of the current situation and examine the potential gains and losses for the tourism industry to enable it to chart a roadmap for recovery and renewed profitability in the long run.

Another recent study by NCAER shows that the overall economy saw a decline of 20.1 per cent in the first quarter of the fiscal year 2021 and of 5.1 per cent in the second quarter but rebounded to record a growth of 4.3 per cent in the third quarter all in nominal terms.In contrast the tourism economy or Tourism Direct Gross Value Added (TDGVA) saw correspondingly much greater declines of 42.8 per cent and 15.5 per cent in the first and second quarters and continued negative growth even in the third quarter of 2021 recording a fall of 1.1 per cent. Commissioned by the Ministry of Tourism to assess the actual impact of the pandemic on India’s tourism sector in terms of loss of incomes and employment the NCAER study also outlines the need for key policy measures to restore growth in the industry and offers recommendations for its renaissance as it were.

The decline in tourist activity is largely driven by the near-complete halt in arrival of international tourists that caused the TDGVA to plummet by as much as 61.7 per cent in the first quarter of 2020-21 from the corresponding level of the previous year. However NCAER finds that the fall in TDGVA resulting from a slump in domestic tourist arrivals has been much more conspicuous and 20-30 percentage points higher than the decline in foreign tourist numbers.

It is thus obvious that contrary to the perception that international tourists bring in all the lucre it is actually domestic travellers who set the cash registers ringing for the industry. NCAER projects that domestic tourism through sheer volumes will primarily drive the recovery in the tourism economy enabling it to regain its pre-pandemic level by 2024-25. However given its huge volume in terms of the number of trips the total tourism expenditure incurred by domestic tourists is well over 70 per cent higher than the total international tourism expenditure.

It seems that we have come a long way from the genesis of tourism as a global industry in 1937 when the League of Nations the precursor of the United Nations defined the term ‘tourist’ as ‘one who goes to another country for pleasure or business or for reasons of health’. The Government of India too accepted the definition categorising a ‘tourist’as ‘a foreigner who comes to India for reasons of pleasure or sightseeing or in a representative capacity to attend a conference of an international character.’ This was reflected in India’s first tourism policy in October 1956 when the Estimates Committee of the Ministry of Tourism and Transport tabled a report before the Lok Sabha Secretariat highlighting the need to promote India as a global tourist destination as the annual foreign exchange earnings brought into the country by international travellers had gone up from Rs 7.1 crores in 1951 to Rs 10.1 crores in 1955.

Today however the Government’s priorities have changed significantly. The current tourism policy in line with the ‘Atmanirbhar’ initiative focuses on primarily promoting domestic tourism to revitalise the sector through measures such as the ‘Dekho Apna Desh’ campaign after the suspension of international travel due to Covid-19. Prime Minister Narendra Modi too has urged all Indians to visit at least 15 destinations within India by 2022 to keep the spirits of the industry alive.

Speaking at the recent Travel Tourism and Hospitality e-Conclave organised by FICCI the Secretary Tourism Government of India Arvind Singh revealed plans to promote unknown tourist spots and lesser-known facets of popular tourist destinations in the country. A uniform policy engaging with all States to lift travel restrictions and boost domestic travel while following Covid-related protocols is on the anvil. This would be part of a new national Tourism Policy focusing on promoting sustainable and responsible travel for MICE (meetings incentives conferences and exhibitions) tourism as well as for wellness and eco-tourism. Accordingly massive vaccination drives are reportedly being undertaken in tourist hotspots throughout the country where travel and hospitality staffers are being treated as frontline workers.

The NCAER study also recommends the introduction of innovative measures in pandemic times to entice potential outbound tourists to visit ‘Swadeshi’ locales instead and furthering the concept of ‘working holidays’ or ‘work from home by travelling to an interesting destination’ engendered by lockdowns and office shutdowns. As they say every adversity nurtures a hidden opportunity. It remains to be seen if India’s tourism industry will rise to the occasion by uncovering this opportunity to rejuvenate itself while successfully deflecting the challenges posed by the virus and its mutations.

Poonam Munjal is Senior Fellow and Anupma Mehta is Editor at NCAER. The views expressed are personal.

The pandemic was a health humanitarian and economic crisis all rolled into one.

The NCAER Business Expectations Survey (BES) tracked firms throughout the pandemic period on a quarterly basis trying to understand the challenges that they faced how they adapted and whether they were able to leverage government benefits targeted at them. In this article we focus on the challenges that the firms faced in 2020 and 2021. The NCAER BES covers 500-600 firms across four regions – North (NCR Delhi) South (Chennai & Bengaluru) East (Greater Kolkata) and West (Mumbai & Pune).

The BES questionnaire was kept dynamic in the sense that there were some questions that were kept constant and some were changed depending on the need of the evolving situation.  Also they were not necessarily asked in the same manner as our learning evolved.  Last but not the least we had asked firms in some rounds to rate on the severity of the challenge that they were facing.  

The challenges are divided in three broad categories – operational cash flow and hiring workers. Table 1 summarizes the responses of firms about the challenges that they faced over the last one year.

Author Provided

Operational Challenges

Faced Logistic Issues: The share of firms reporting this to be a challenge had increased over the last six quarters. It reached its peak in the second wave of the pandemic in 2021-22:Q1 39.6 per cent of responding firms had even reported this to be a severe challenge.  What is a concern is that a quarter of firms continued to report this a severe challenge in 2021-22:Q2 as well. The regional variations show that 65.6% of firms in the North reported this to be a severe challenge.  67% of service sector firms reported this to be non-issue for them in 2021-22:Q2.

Ability to source raw materials from suppliers: Slightly more than 20% of firms had reported this to be challenge in 2020-21:Q3 as against 35% in 2020-21:Q2. While this was not a challenge for majority of the service sector firms a larger share of firms with annual turnover ≤ Rs 100 crore perceived this to be a severe challenge (65%). The corresponding number for firms with annual turnover greater than Rs 100 crore was 46%.  However we had not continued with this question as both domestic & external markets opened up.

Ability to meet pending sales order: This challenge was especially acute too during the second wave of the pandemic in 2021-22:Q1. However even during the second quarter 23% of firms continued to report this as a severe challenge. This is an acute challenge in the Northern region as 54.4% of firms reported this to be a severe challenge. 66% of service sector firms reported this to be non-issue for them in 2021-22:Q2.

Cash Flow

Ability to get dues in time: 80% of firms reported this be a challenge in the second wave of the pandemic and 40% reported this to be a severe one. However this number has come down in 2021-22:Q2. This was not a problem in the services sector as 61% of firms reported that no dues were pending. However 18% of firms in the western region reported that no dues were pending.

Ability to pay suppliers on time: The prior rounds indicate that approximately 40% or lower share of firms were having problem in paying suppliers on time.  However in 2021-22:Q2 80% of firms reported this to be a challenge and 18% reported this to be severe one.  

Hiring Workers: This was a severe challenge in 2020-21:Q2 which had eased over the subsequent quarters. Currently while firms are reporting this to be a challenge it is not a severe one.

Policy Implications

The challenges have eased in 2021-22:Q2 from the time of the second wave of the pandemic. However firms in the North continue to face operational challenges in logistics issues and ability to meet pending sales order.  This needs to be examined more deeply as to what particular challenges are the firms facing which can then be addressed.  Cash flow is clearly a problem in the West.  More needs to be done by States to address the challenges that firms are facing.

Bornali Bhandari is Senior Fellow KS Urs Associate Fellow and Ajaya K Sahu is Senior Research Analyst at NCAER.  Samarth Gupta is a former Associate Fellow at NCAER. Views are personal.

The United Nations propounded the celebration of “International Days as “occasions to educate the general public on issues of concern to mobilize political will and resources to address global problems and to celebrate and reinforce achievements of humanity”. As in the past we are going to celebrate the 3rd of December as the International Day of Persons with Disabilities (IDPD). The theme for this year is “Leadership and participation of persons with disabilities toward an inclusive accessible and sustainable post-COVID-19 world.”

The WHO estimated that more than one billion people – about 15% of the world’s population – experience some form of disability. Pertinently it is possible that almost everyone will be temporarily or permanently impaired at some point in life. It is a well-accepted fact that persons with disabilities suffer from the lack of access to healthcare education and employment keeping them suppressed economically. At the same time it is often seen that they spent less time in community participation and socialising. This lead to a situation where they become less social inclusive with much negative bearing on their social psychological and physical life. They become less socially integrated and remain isolated in their communities.

In India after the Act of 1995 was repealed we now have the Rights of Persons with Disabilities Act 2016 which defines a “person with disability” as “a person with long term physical mental intellectual or sensory impairment which in interaction with barriers hinders his full and effective participation in society equally with others”. It is often observed that there is significant differences in community participation between persons with disabilities and persons without disabilities.

Some of the social & community related activities would include participating in (i) community celebrations of cultural and historic events (ii) community rites/events like weddings funerals births collective religious practice and similar rites (iii) community social functions like music dance etc (iv) civic and related responsibilities (v) organized/mass cultural events and shows (vi) attendance at sports events playing games and other pastime activities etc.

There are varied reasons that could be attributed to lesser community participation by disabled persons. Some of the reasons that could be attributed for this phenomenon could be (i) fewer opportunities to engage (ii) social activities are often infrequent and when they do occur they are reported as less fulfilling than activities for non-disabled persons (iii) inaccessible environments (iv) lack of transportation (v) greater risk for re-hospitalization and reduces their ability to participate and (vi) severity of disability or impairment. At times it could be simply the lack of support from their family and the overall community.

There is lack of data to identify the amount of time spent by disabled persons in community and social activities and the accurate and precise factors that are hindering their active participation. A country-wide survey on the lines of “Time Use Survey” can be thought of to identify the types of community activities where disabled persons participate and the time that they spent on such activities. The additional information should include the issues where disabled persons identify as hindrances or problems in fulfilling their desire to actively participate in community and social activities.

Community participation is a versatile and contextual phenomenon and it is considered vital for health and wellbeing promoting a sense of belongingness provides social support and opportunities for physical activity. But community participation does not take place in a vacuum. The environment accessibility and opportunity dynamically influences social and community participation. There is a need to ensure that persons with disabilities are able to exercise their choice and control to enable them to go beyond being only passive recipients of services and to participate meaningfully in community and social life. The realisation that unjustified segregation of people with disabilities is a form of discrimination and need to be prohibited is the starting point towards a sustainable solution.

*Dr Palash Baruah is Senior Research Analyst National Council of Applied Economic Research (NCAER) New Delhi and DL Wankhar is a retired Indian Economic Service Officer. Views and opinions expressed in this article are personal.

Opinion: Mythili Bhusnurmath

How does one read GDP numbers for Q2 2021-22? In keeping with Miles’ Law — Where you stand depends on where you sit — the reactions from GoI and the Opposition to the data released on Tuesday were entirely predictable. Triumphalism from government and murmurs about the shine lent to the numbers by base effects from the latter. Is it possible to take a dispassionate view? As befits my tribe of ‘on the one hand-but on the other’ economists — about whom Harry Truman reportedly despaired calling (in vain) for a ‘one-handed economist’ — there is good news and bad.

The good news is that at 8.4% Q2 growth is well above most estimates including the Reserve Bank of India’s (RBI) 7.9%. Also unlike in the comparable period last fiscal when every sector save agriculture and electricity contracted this time round all did well. Two in fact have grown sequentially — financial services and public administration the latter up 17.4% from 5.8% in Q1 2021-22 and a contraction of 9.2% in Q2 2020-21.

Together with the stellar growth of 4.5% recorded by agriculture the ground seems to be laid for the much-hoped-for recovery with nominal GDP for Q2 (Rs 35.73 lakh crore) finally surpassing the pre-Covid Q2 level (Rs 35.61 lakh crore). Add to that strong core sector growth (7.5%) in October 2021 improvement in gross fixed capital formation (GFCF) a.k.a. investment strong growth in revenue receipts and better control over revenue expenditure resulting in a fiscal deficit of just 36% of the budget estimate for 2021-22 against 120% of last fiscal’s budget estimate and it would appear GoI’s cup of joy is overflowing.

Alas there is a fly or two in the ointment. Just when we think we are out of the woods there’s a new threat — Omicron. As of now we do not know whether this mutant strain will be as destructive of both economies and human lives as the earlier variant. But when the World Health Organisation (WHO) calls it ‘very high risk’ countries must sit up and pay heed.

Granted a repeat of the 2020 lockdown is highly unlikely. But restrictions on mobility seem inevitable. These are bound to have an adverse consequence on economic growth given the high share (60%) of the contact-intensive services sector in our GDP.

The other elephant in the room about which there is much less uncertainty and is largely of our own making is rising inflation. RBI’s accommodative monetary policy served us well in the early days of the pandemic. But thanks to its tardiness in withdrawing excess liquidity despite average inflation remaining above its target range last year high inflation is here to stay.

At 4.5% consumer price inflation for October 2021 seems deceptively low. But it is only a matter of time before the impact of high wholesale price inflation (12.54%) the highest in five months gets translated to higher retail prices.

In a scenario where traditionally low-inflation countries like the US and Germany are reporting inflation at a three-decadal high of close to 6% and supply bottlenecks could possibly re-emerge it is naïve to expect India will remain an outlier and be able to tame inflation never mind brave talk of inflation being ‘transient’.

Unfortunately neither GoI nor RBI seems fully cognisant of the impending danger. Contrast this with the US. ‘I’m here to talk about one of the most pressing economic concerns of the American people.

And that is getting prices down number one; number two making sure our stores are fully stocked; and number three getting a lot of people back to work while tracking and tackling these two above challenges.’ That was Joe Biden speaking in Baltimore early November.With US inflation hitting 6.2% in October ‘getting prices down’ rather than growth is now Biden’s top priority. Both growth and inflation impact citizens. But while the impact of growth is indirect and usually skewed in favour of the better-off high inflation impacts the poor disproportionately as they do not have neither staying power nor access to social safety nets.

Given the nature of the beast inflation finally will stall growth as well as that is how the remedy — high interest rates — works. With a hike in US interest rates just months if not days away India is in for troubled times. Even if we avoid the taper tantrum of 2013.

Let’s not lose sight of why GDP numbers matter. As Tom and David Chivers point out in their book How to Read Numbers: A Guide to Statistics in the News (and Knowing When to Trust Them) ‘If the people in charge aren’t careful they can lose sight of the fact that the metric isn’t what you really care about but is a proxy for an often complex multifaceted and hardto-define — but nonetheless real — underlying quality which you do care about.’

In the context of GDP the underlying real quality is human welfare. Something that GDP can never capture entirely but the political leadership in a democracy ignores only to its peril.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

The NCAER Business Expectations Survey (BES) closely tracked firms throughout the pandemic period on a quarterly basis trying to understand the challenges that they faced how they adapted and whether they were able to leverage government benefits targeted at them.

After the second COVID-19 wave business sentiments recovered in 2021–22:Q2 as compared to those prevailing in 2021–22:Q1. The NCAER Business Confidence Index (BCI) increased by 90 per cent on a quarter-on-quarter basis and by 80 per cent on a year-on-year basis. Furthermore BCI is now higher than the pre-pandemic level in 2019–20:Q2 signalling recovery from the worst of second COVID-19 wave. 

The NCAER Business Expectations Survey (BES) closely tracked firms throughout the pandemic period on a quarterly basis trying to understand the challenges that they faced how they adapted and whether they were able to leverage government benefits targeted at them. In this article we focus on two things – (i) government pandemic measures & their relevance for firms and (ii) firms wish list from Budget 2022.

Availing benefits from policy measures

The government had announced several measures for firms including subsidised rate or special credit facilities greater repayment flexibility or extended loan tenures postponement of filing taxes and reduction in penalty on overdue Goods & Services Tax filing. In Round 118 of the NCAER BES we had asked firms to evaluate to rate the perceived benefits of key policies on a scale of 1 to 5 with 1 being least beneficial and 5 being most beneficial. Policies were found to have significant benefit when firms rated them 4 or 5.

1. Postponement of filing taxes: 52.2% of firms found this policy to be of significant benefit. This number was 54.5% for small firms i.e. firms with annual turnover ≤Rs 100 crore and 48.7% for large firms i.e. firms with annual turnover > Rs 100 crore.
2. Reduction in penalty of overdue GST filing: 50.5% of firms found this to be significantly beneficial.
3. Moratorium on loans:  43% firms perceived this policy as significantly beneficial.
4. Credit Policies: Several rounds of the NCAER BES show that credit uptake worsened between June 2020 and March 2021 with 75% of firms responding that they were not even aware of the Emergency Credit Line Guarantee Scheme (ECLGS). There has been improvement in share of firms responding that they had ‘taken credit in the last three months’ in June and September 2021 (Improving The Credit Scenario In India). Despite the improvement 70% of firms had responded that they had not ‘taken credit in the last three months’ in September 2021 and only 19% of firms were planning to take credit in the next three months.    Among the firms that took loan during the last three months 48% responded that they utilised some government scheme announced post-Covid to take credit. Awareness about schemes like ECLGS had also improved after December 2020.  
5. Factorisation: A common challenge that has been reported by firms is about pending dues from their buyers.  In September 2021 54.2% of firms had responded that they had pending dues from private sectors buyers. To address this the government amended the Factoring Regulation Act 2011 in 2020 to widen the scope of entities which can engage in factoring business. NCAER BES in September 2021 asked firms about their awareness of this policy and if they would sell their ‘invoices’ to a factoring firm at a discount in exchange for quicker funds. Our survey suggests that nearly two-third firms were aware of the Factoring Regulation Act with corresponding figures for small and large firms being 57% and 73% respectively. Despite high awareness of the new laws most firms were reluctant to avail benefits from this funding source. Specifically 57% firms were not willing to sell their ‘invoices’ to a factoring firm at a discount. The main reason given by firms was they had no such margin to sell their business at a discount. 

Wish list from the government for Budget 2022

As the pandemic abates and economic conditions improves policy set may require changes to support firms.  Among the various policy options 83% firms responded that they wanted the GST process simplified. Thus easing regulatory burden or business rules was the top priority of firms. This was followed by some measure of financial support. Around 63.5% of firms wanted wage support and 54% firms wanted the government to provide financial grants to sail through the crisis.  Interestingly only 48% firms require tax holidays while 32% firms responded that they wanted favourable custom duties/import tariffs. 

In sum the relevance of the policies announced by the Government in the immediate aftermath of the pandemic was varied.  Only two policies namely ‘postponement of filing taxes’ and ‘reduction/waiver of late payment penalties’ were perceived to be significantly beneficial by slightly more than 50% of firms.     Further easy credit availability either through credit guarantee scheme or market innovation of factoring did not appear to be of significant interest to firms. Thus cost reducing measures appeared to have benefited the firms more than capital infusion policies. 

Juxtaposing the perception of benefits against wish list in the future we find that capital infusion or monetary support were not the most preferred options. Instead easing regulatory burden by simplifying GST procedures may gain better yields. This not only improves ease of doing business but also improves further tax collections.    

Bornali Bhandari is Senior Fellow KS Urs Associate Fellow and Ajaya K Sahu is Senior Research Analyst at NCAER.  Samarth Gupta is a former Associate Fellow at NCAER.  Views are personal.