Budget 2021: Expectations Vs Reality

Budget 2021 has been highly anticipated by all stakeholders in view of the COVID-19 pandemic that has devastated the economy, shrunk GDP, led to loss of millions of jobs. In this year’s budget, Finance Minister Nirmala Sitharaman has announced  a 137 per cent increase in the budget outlay for health and welfare, to INR 2,23,846 crore. 

The FM also proposed 35,000 crore for COVID-19 vaccines. Besides, Sitharaman announced the privatisation of AAI airports in tier 2 and tier 3 cities to monetise the assets. Similarly, an allocation of Rs. 1.15 lakh crore was declared for Indian Railways to develop the National Railway Plan for India 2030.

What does it mean for the Hospitality and Travel and Tourism sector?

While there has been no immediate direct support mentioned in the Budget 2021  for the respite of  the Hospitality and Travel and Tourism sector, the above mentioned highlights made by the FM will provide a boost to all the sectors in the long run.

The immediate demands made by FAITH Associations for the industry including a common industry status for the entire tourism industry by putting it in the concurrent list, creation of a National Tourism Council of Chief Ministers headed by the PM along with tourism minister, export earnings from tourism being made tax free, incidence of taxes in tourism earnings being zero rated and an income tax exemption on travelling within India income tax credits for upto ₹ 1.5 lakhs when spending with GST registered domestic tour operators, travel agents, hoteliers and transporters anywhere within the country  have not found a place in the budget.

What are industry leaders saying?

The COVID-19 pandemic negatively impacted the Hospitality & Tourism sectors. Disappointed by the absence of the sectors in FM’s speech and commenting on what should have been done, Vineet Verma, MRICS, Executive Director & CEO, Brigade Hospitality stated, “It is important to extend some breathing space to the almost choked industry for it even to survive and before it finds its own way to get on to the path of recovery.” 

Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts believes that this time, the budget did not have anything specific for the tourism and hospitality sectors. “I feel a broader focus on the budget on increasing consumption and infrastructure spend by the government will have a positive impact on the hospitality sector. The government has done the right thing by not introducing any new tax or COVID cess as some had anticipated. We also believe that the amount allocated for COVID vaccination is a positive for our sector as more people get vaccinated it will encourage people to travel,” he said. 

Calling the Tourism and Hospitality sector as one of the worst affected sectors that is struggling to cope, Wajeed Bagwan, General Manager, Oakwood Premier Prestige said, “We expected the Union Budget announced today to address this sector which didn’t receive any relief. We were hoping for reductions in GST rates from 18 per cent to at least 12 per cent on room tariff to improve our occupancy.”

He further highlighted that the sector’s contribution to the GDP amounts to 10 per cent and that to employment generation is almost 9-10 per cent. However, the sector is still waiting for the industry status.

Dissatisfied with the finance minister’s announcements, Roop Partap Choudhary, MD, Noor Mahal feels that the budget did not bring major relief to the travel and tourism industry. However, he feels that the steps taken today may help in the long run. Commenting on the positive side of the budget, he elaborated, “Providing Rs.1.15 lakh crore for Railways and privatizing airports, the government has given some aid to domestic tourism. A special impetus to local infrastructure development will definitely encourage domestic hospitality, travel and tourism. Development of road networks across the country gives regional and stand-alone players, at locations considered off the main grid, a fair chance to compete with the main-stream hospitality circuits. Other infrastructure developments in Tier II cities would assist the growth potential of regional hospitality players and possibly flip the whole scenario in near future.”

In contrast, he mentioned that the industry was expecting a more liberal and reasonable investment and loan framework from the union budget. He believes that a more flexible and tolerant financial environment could have supported small hospitality players to explore more growth avenues in these testing times. 

“To encourage guest occupancy, boost domestic travel and help small/independent properties to be more competitive in the market, GST on room bookings should also be reduced from 18 per cent to 10 per cent as government efforts to support the industry on its path to recovery,” he added.

Shivanand Shetty, President, AHAR (Indian Hotel and Restaurant Association) shared a similar sentiment on the budget announcement. “The budget has failed to cheer up the restaurant industry which is one of the most affected due to Covid-19 pandemic and subsequent lockdowns. After all the turmoil, we had our hopes pinned on the budget and were expecting some positive measures like stimulus package, rationalisation in GST etc., but again we found no mention in FM’s speech. Such a critical sector contributing well to the GDP and generating employment opportunities cannot be ignored like this especially when it is needed the most,” he said.