For a sustained and all-round economic growth, there is need for an integrated sectoral approach to ensure the ease of doing business
Discussions on the performance of the Indian economy have been taking place for months now. The many years and cycles that our economy has been through show that in order to grow at a healthy pace and sustain that growth year after year, no sector can operate in isolation. From being recognised as a predominantly agrarian economy in its early days, we have seen various sectors develop, contribute and help grow its overall size.
The Pahle India Foundation’s (PIF) 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 synergy between the three sectors. This has remained largely unexploited. States like Kerala and Bihar, which have an immense potential for tourism, have been battling broader policy issues like the ban on alcohol. Kerala quickly realised the effects of prohibition and reversed it two years after it was imposed in 2015. Why such a ban 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 3,000 crore in excise revenues in a year after alcohol ban in 2016; tourism is down too as the State has seen a decline in the number of domestic and international arrivals. According to data from the State tourism department, the number of domestic tourists in Bihar was approximately 61.52 lakh in 2015, which in 2016 decreased to 42.84 lakh. At present, Gujarat, Nagaland and the Union Territory of Lakshadweep also practise prohibition.
Sadly, reforms on the Ease of Doing Business (EoDB) front have been very generic so far and there are many challenges which need to be overcome for the tourism industry to realise its potential. For instance, among the many licences that are required today to start a hotel, one is for washing clothes. There are close to 70 such licence requirements which are a burden on the industry. The estimate made in the report that the Indian hotel industry has a potential to grow to $424 billion by 2027 points to a clear need to rationalise policies across sectors in order to harness it.
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 allied economies play a role for the growth of tourism to sustain such benefits. There is a need to bring down the incoherence 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 its promotion and development.
From the perspective of EoDB, recognising the need to upgrade tourism infrastructure in India, the Central Government has proposed an outlay of Rs 152 billion for the sector. From an EoDB perspective, the States have a bigger role than the Centre.
As the report points out, the tourism sector today faces various challenges not just with respect to the value chain but also in services and infrastructure. Some of these include an ineffective single window clearance and extended time periods for clearances and licences. To make things simpler we need to further enhance the efficacy and implementation of the Government’s skill development programme and it is here that 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 Gross Domestic Product (GDP) of the country, the World Travel and Tourism Council (WTTC) report of 2018, has pegged the tourism sector to grow to Rs 29,680 billion by 2027. At present it accounts for Rs 16,380 billion, which is 9.4 per cent of India’s GDP.
For the industry to achieve its true potential, a conducive reforms programme will have to be implemented on the lines of what the report is suggesting. The PIF report makes several critical recommendations. Ideas like creation of investor and entrepreneur-interactive platforms (competitions, fairs, summits) in small cities are the need of the hour. A quick and transparent licencing process is another important need and enforcing stricter timelines a necessity. Enhancing EoDB is a challenge but policy initiatives in the right direction are a must, specially considering the tightrope walk that the Government is doing for ensuring that the economy remains on track and moves in the right direction. An integrated approach to EoDB is the first step in that direction.
(The writer is MC Member, Hotel and Restaurant Association of Northern India and The Federation of Hotel & Restaurant Associations of India)