Budget 2024 travel and tourism: Government's spiritual tourism push lacks hotel development policies; industry continues to seek infrastructure status

Finance Minister Nirmala Sitharaman announced the Union Budget for the fiscal year 2024-25 on Tuesday, making it her seventh consecutive budget. She proposed measures for different sectors, focusing extensively on nine priority areas: productivity in the agriculture sector, skill development and employment, inclusive human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development, and next generation reforms.

While tourism didn't occupy a large space in the budget announcements, some key measures were introduced that will directly or indirectly impact the travel and hospitality sector in India. The tourism sector has been allotted a budget of Rs. 2479.62 crore for 2024-25.

IN PHOTOS: Railway commuters at CSMT, Dadar stations during Union Budget presentation

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Recognising the surge in travel and India's growing prominence as a global tourist destination, FM Sitharaman stated, "Tourism has always been a part of our civilization. Our efforts in positioning India as a global tourist destination will also create jobs, stimulate investments and unlock economic opportunities for other sectors."

Almost all major initiatives introduced for tourism are infrastructure-based and broadly centered in the states of Bihar, Andhra Pradesh and Odisha. With an extensive focus on spiritual and cultural tourism, the Union Budget measures are expected to shape and change travel trends in the country in the upcoming years.

While travel and hospitality companies are optimistic about the measures introduced and view them as a way to advance domestic tourism, several associations have expressed their disappointment over ignorance of key demands.

Here, we decode the key measures introduced for the travel, hospitality and transportation sectors, and speak to industry leaders to understand how this budget will shape travel in India.

Key Highlights - Tourism and Hospitality

• Comprehensive development of the Vishnupad Temple at Gaya and Mahabodhi Temple at Bodh Gaya in Bihar will be undertaken to transform them into world class pilgrim and tourist destinations. This will be modelled on the successful Kashi Vishwanath Temple Corridor.
• The development of Rajgir, which holds religious significance for Hindus, Buddhists and Jains, will be undertaken.
• The government will support the development of Nalanda as a tourist centre besides reviving Nalanda University to its glorious stature.
• The government will provide assistance for the development of Odisha's scenic beauty, temples, monuments, craftsmanship, wildlife sanctuaries, natural landscapes and pristine beaches.
• Recognising the tremendous potential for cruise tourism in India, which is also an employment-generating industry, a simpler tax regime has been proposed for foreign shipping companies operating domestic cruises in the country.

Key Highlights - Transportation and Connectivity

• Development of road connectivity projects will be undertaken, namely (1) Patna-Purnea Expressway, (2) Buxar-Bhagalpur Expressway, (3) Bodhgaya, Rajgir, Vaishali and Darbhanga spurs, and (4) additional 2-lane bridge over river Ganga at Buxar at a total cost of Rs. 26,000 crores.
• New airports will be constructed in Bihar.
• For promoting industrial development, funds will be provided for essential infrastructure such as water, power, railways and roads in Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and Orvakal node on Hyderabad-Bengaluru Industrial Corridor.
• Transit Oriented Development plans for 14 large cities with a population above 30 lakh will be formulated, along with an implementation and financing strategy.
• Phase IV of PMGSY will be launched to provide all-weather connectivity to 25,000 rural habitations which have become eligible in view of their population increase.
• To promote domestic aviation and boat and ship MRO, the period for export of goods imported for repairs will be extended from six months to one year. In the same vein, the time-limit for re-import of goods for repairs under warranty will be extended from three to five years.

These measures were introduced in addition to the ones already proposed during the Interim Budget in February this year.

Interim Budget Highlights - Tourism, Hospitality and Transportation

• States will be encouraged to undertake comprehensive development of iconic tourist centres including their branding and marketing at a global scale.
• A framework for rating the tourist centres based on the quality of facilities and services will be established.
• Long-term interest-free loans will be provided to states for financing such development on a matching basis.
• To address the emerging fervour for domestic tourism, projects for port connectivity, tourism infrastructure, and amenities will be taken up on the islands, including Lakshadweep.
• Three major economic railway corridor programmes identified under the PM Gati Shakti scheme will be implemented to improve logistics efficiency and reduce cost. These are: energy, mineral and cement corridors, port connectivity corridors and high-traffic density corridors.
• Forty thousand normal rail bogies will be converted to Vande Bharat standards.
• Expansion of existing airports and development of new airports will continue expeditiously.
• The EV manufacturing and charging infrastructure will be strengthened. Greater adoption of e-buses for public transport networks will be encouraged through payment security mechanisms.

Industry leaders and associations react

The measures for tourism and hospitality introduced at the Union Budget received mixed reactions from industry stakeholders. While most of them expressed hope for growth and diversification of tourism in India, others expressed disappointment over the non-fulfillment of demands and lack of any major initiative for tourism.

Focus on spiritual tourism and infrastructure development

The India Travel Trends Report by MakeMyTrip released in April 2024 found that searches for spiritual tourism witnessed a 97 per cent increase in 2023 compared to 2021. This domain of tourism is further expected to grow after the measures introduced in the budget.

Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip, commented, "The government's continued emphasis on infrastructure development is commendable. Enhanced road infrastructure will bolster the travel and tourism sector. We also welcome the initiatives to develop iconic spiritual and cultural sites into world class tourist hotspots. The decision to reduce the TDS rate on e-commerce operators to 0.1% is a welcome move. Furthermore, the provision of credit for TCS against income tax under 'Income from Salaries' is logical and will provide much-desired relief to taxpayers who travel internationally."

Yogesh Mudras, Managing Director of Informa Markets in India (Organisers of SATTE), also hailed the move to promote spiritual tourism. "Enhancing infrastructure around significant temples, pilgrimage sites, and scenic beach destinations will not only elevate the overall tourist experience but also position India as a premier global destination for spiritual and cultural journeys. These initiatives are expected to stimulate economic growth, create jobs, and attract substantial investments across various sectors. Improving infrastructure is especially crucial, as it will enhance connectivity, accessibility, and the quality of services, ensuring that visitors have a seamless and enriching experience," he stated.

Aloke Bajpai, Chairman, Managing Director and Group CEO of ixigo, welcomed the policy initiatives. "The government's policy initiatives to enhance spiritual tourism are a welcome move towards growing domestic tourism and making India a global travel destination. We saw a 40-50% increase in demand for spiritual tourism last year, for destinations like Varanasi, Ayodhya and Tirupati. The government's PRASAD Scheme has led to a remarkable transformation in Varanasi's tourism sector, attracting an unprecedented 100 million visitors to Kashi Vishwanath Dham after the corridor project completion," he revealed.

"We expect a similar boost in tourism to Bihar and Odisha with spiritual tourism corridors coming up for Vishnupad Temple and Mahabodhi Temple at Bodh Gaya, along with comprehensive initiatives for Rajgir, Nalanda, and Odisha," he added.

K.B Kachru, President of Hotel Association of India (HAI) and Chairman - South Asia of Radisson Hotel Group, appreciated the focus on infrastructure development. "The continued focus on government spending on infrastructure development augurs well for the sector. Improved infrastructure would translate into better connectivity which will be beneficial to the promotion of tourism. The development of the eastern region especially Odisha, temple corridors in Gaya / Bodhgaya, Rajgir and identification of Nalanda as a key tourism site continue to demonstrate the government's intent to utilize the potential of tourism," he said.

More to be done in the tourism sector

However, there is much left to be done in the tourism sector. Some industry leaders and travel associations have expressed their disappointment and stated issues that still remain unaddressed.

"Regrettably, however, there has been no policy announcement to facilitate the development of hotels and promotion of inbound tourism. Although not directly linked to this budget, the industry would continue pursuing its ask for grant of infrastructure status for the hospitality sector and industry-related benefits by all state governments," Kachru stated.

Indraneel Dasgupta, Co-founder of My Tirth India, said, "Travel is one of the fastest growing industries in India. However, there are no direct benefits or changes from government for the travel and tourism industry. Overall, the budget looks kind of positive for investments and growth. Hoping that as we move forward, the tax slabs will be further reduced and people would have more money in hand to spend."

In an official statement, the Travel Agents Association of India (TAAI) also expressed their disappointment over the tourism measures introduced.

"Despite being one of the key drivers of economic growth and employment, the sector has been notably underfunded and overlooked in the latest budget," the statement read.

It further stated, "The FM in her speech highlighted infrastructure development for only two to three religious locations which shall be taken up for development and promotion by the government. These religious circuits are raw and need a huge push. Rather than upgrading the current locations and enhancing last mile connectivity to popular locations, the Govt. is trying to push locations where connectivity is a huge challenge and there is a lack of interest in the Domestic as well as the inbound tourism market."

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They appreciated the decrease of the TDS for all e-commerce platforms from 1% to 0.1% and a simpler tax regime for foreign shipping companies' operation in the domestic market, but expressed disappointment over demands like reduction in Aviation Turbine Fuel cost, rationalisation of GST rates and abolishment of TCS on outbound travel being ignored.

Pradeep Shetty, President of the Federation of Hotel & Restaurant Association of India (FHRAI), commented, "There is nothing spectacular in the budget to bring structural changes to address the fundamental challenges the hospitality sector faces in a competitive world order and to accelerate the growth of the sector to be a $ 3 trillion economy by 2047. Some key demands of tourism & hospitality to revitalise the sector such as GST rationalisation, granting of infrastructure status and bringing ease of doing business and policy reforms have not been considered in the budget once again, given the well-accepted multiplier effect of tourism on employment and economy."

However, he appreciated the initiatives introduced. "The hospitality sector is disappointed but not dejected as the overall focus on infrastructure development, employment generation and skill development and development of religious tourism centres are the silver linings which will help the sector to tide over some of the critical challenges that it faces today," he said.

While the tourism and hospitality sectors are not entirely satisfied with the outcome of the budget, there's hope for a change in the direction of tourism in India with increased infrastructural development and spiritual tourism initiatives. However, there is much left to be done for the overall growth of the sectors.

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