Published on : Friday, January 5, 2018
According to government sources, India is planning to reduce taxes on travel and tourism in next month’s union budget and extend more incentives to the $210-billion sector hoping to boost economic growth and create more jobs.
The move is expected to boost domestic tourism in the world’s second most populous nation, where low inflation and rising incomes are changing lifestyles and consumption patterns of an estimated 250 million middle-class Indians. With scores of destinations introduced on airline routes last year, air travel is also surging.
India’s tourism sector grew over 10 per cent in the six months ending September, compared to near 8 per cent in the year-ago period. The tourism industry employs 40 million people in India and could add 10 million jobs in a decade.
“We’ll announce measures in the budget to promote investment in the tourism sector,” a top finance ministry official said, adding that Finance Minister Arun Jaitley favours lowering a 28 per cent tax on hotel tariffs, and offering incentives to attract private investments.
If the moves come about, companies expected to benefit include airlines like IndiGo, owned by InterGlobe Aviation, and Jet Airways and hotel operators such as Indian Hotels, that owns the Taj Mahal chain and EIH Ltd that operates the Oberoi hotels in India. Tour operators including Cox & Kings and Thomas Cook are also likely to gain.
Hotel occupancy levels in India are at their highest levels since 2008, even though many hotel chains have raised prices. India needs about 200,000 new hotel rooms, Tourism Minister K.J. Alphons told parliament this week.
Another government official said the budget was likely to “significantly” raise allocations for tourism infrastructure and raise income tax exemptions on investments in new hotels.
A third official, who is aware of the finance ministry’s pre-budget consultations with industry groups, said Jaitley was expected to lower income tax on corporate profit, offer tax incentives on hotel construction, allocate more funds for new tourist trains and building roads to tourist destinations.
The government will offer incentives to more regional airlines this year to cover new, under-served airports, the official added.
Prime Minister Narendra Modi has said developing tourism, particularly in India’s remote north-eastern states, is one of his top priorities.
One major driver of the domestic tourism boom has been the launch in 2017 of five regional budget airlines on over 100 routes, which are given incentives by the government to offer cut-price flights to uncovered and remote areas, encouraging thousands of families to explore flying for the first time.
Domestic airlines carried 10.6 million passengers in the first eleven months of 2017, up 17 percent from the year-ago period – encouraging some established players like Spicejet, Jet Airways and Vistara, a joint venture between the Tata Group and Singapore Airlines, to start flights to new locations. Double-digit hikes in urban wages, coupled with an over 25 per cent rise in the benchmark Sensex index last year, have contributed to the domestic tourism boom. At the same time over 9 million foreigners visited India in the first 11 months of 2017, up 15.6 per cent from a year ago.