Indian Union Budget Disappoints Tourism Industry… Yet Again

The travel industry in India had a long wish list for the Union Budget released Tuesday: Industry status for tourism; a uniform tax rate for hotels; streamlined registration for online travel agencies; infrastructure status for hotels.

Instead the industry got a few small offerings: Indian Finance Minister Nirmala Sitharaman said India will develop two temple destinations in Bihar — Vishnupad Temple in Gaya and Mahabodhi Temple in Bodh Gaya. And she said there would be a focus on developing tourism in Odisha. Two tax reform measures were well received.

But despite the focus on making India a global destination, there was no change in the global promotion budget, which had been earlier been reduced by 97% in the interim budget announced in February.

“We expected that the government would reinstate the advertising budget for overseas promotion of inbound tourism. It’s disappointing that this didn’t happen,” said Madhavan Menon, executive chairman of the Thomas Cook (India) Group.

“Our longstanding demand for infrastructure/industry status — a critical stimulus for travel and tourism growth — was also left unrealized,” Menon added. 

Aviation and hospitality received no mention in the budget. “Both standardizing the good and services tax (GST) rate on hotel tariffs to 12% and reducing aviation turbine fuel (ATF) were unaddressed,” Menon said.

Tax Reform

Apart from the boost to spiritual tourism, the government also attempted to simplify the taxation levied on cruise businesses.

“The government has also shown interest in simplifying taxation in cruise business by proposing a presumptive taxation for cruise ship operations in India. This initiative aims to encourage foreign cruise owners to operate in India,” said Rikant Pittie, co-founder of EaseMyTrip.

The budget also proposed to reduce the tax deducted at source (TDS) for e-commerce companies from 1% to 0.1%. 

MakeMyTrip Co-Founder Rajesh Magow appreciated the initiative, adding, “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.”

What did the Budget Bring?

The biggest takeaway from the budget for the tourism industry was the boost to spiritual and religious tourism in Bihar. The Vishnupad Temple Corridor and Mahabodhi Temple Corridor in Bihar will also be developed on the lines of the Kashi Vishwanath Corridor in Varanasi. This would help to facilitate better tourist flow and provide improved amenities and facilities. 

The government’s Pilgrimage Rejuvenation and Spiritual Augmentation Drive (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, said Aloke Bajpai, chairman, managing director and group CEO of Ixigo.

“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. We expect this to benefit our large next billion user base which predominantly relies on buses and trains to access these spiritual towns,” Bajpai said.

A development initiative will also be taken for Rajgir, a city in Bihar which is of religious importance to Hindus, Buddhists and Jains. 

Spiritual Tourism Boost

The boost to spiritual tourism is bolstered by various reports. According to real estate services firm Colliers, spiritual tourism is giving a boost to emerging cities in India as it is leading to development of more tourism-related infrastructure. 

Online travel company Cleartrip’s Chief Business and Growth Officer Anuj Rathi shared that in the first half of 2024, the OTA registered a double-digit increase in searches on a month-on-month basis for key pilgrimage destinations such as Varanasi, Tirupati, Bhubaneswar, Bodh Gaya,  Amritsar, and Ajmer.

Radisson Hotel Group managing director and area senior vice president for South Asia Nikhil Sharma said, “Spiritual tourism is finally receiving the much-needed support in this year’s budget. The development of road connectivity projects, with a special emphasis on spiritual and cultural corridors, will fuel the growth of the country’s cultural and spiritual network of tourism. We are optimistic that this development will not only propel the domestic tourism sector but will also provide an opportunity for foreign tourists to further explore India.”

A month after Prime Minister Narendra Modi’s visit, the budget also announced a plan to promote centuries-old Nalanda in Bihar as a tourist center.