Finance Minister Nirmala Sitharaman will unveil the interim budget for fiscal year 2024-2025 (FY25) on February 1, 2024, which will most likely remain focused on maintaining nominal economic growth, although it may not involve any primary policy changes.
Since 2024 is an election year with elections in Lok Sabha in May, the Finance Minister will provide an interim budget or a vote on account on February 1, rather than a full annual budget. After the formation of the new government, the full new budget is scheduled for July this year.
Sitharaman’s claim that it will be a reckoning vote suggests that no significant political announcements will most likely be expected in this interim budget. A vote on account is only a provisional authority to spend money, as opposed to a complete budget that includes the main points. of expenses and income.
Analysts say the upcoming pre-election interim budget comes at a time when the overall economic outlook looks stable, supported by an easing of the monetary situation and macroeconomic data.
Coming to sector-specific views, the travel and tourism sector represents a vital economic driver for the Indian economy. With a 5.8 per cent contribution to India’s gross domestic product (GDP) (in 2022) and the government’s target of achieving $1 trillion by 2047, the sector forms a strong force multiplier – across allied sectors, employment generation and foreign exchange receipts.
According to a report by Bernstein, India has gradually gained a share of the world market, and now accounts for 2% of global tourism revenues, up from 0. 7% in 2000. Domestic tourism in India is already the fifth largest in the world and is expected to increase. become the third largest by 2027.
Read also: Budget 2024 expectations: rationalization of CHT credit to GST credit: this is what the tourism sector expects this year
Rajesh Magow, co-founder and CEO of MakeMyTrip Group, in an interview with Mint’s Nikita Prasad, said that the government deserves to make adjustments such as cutting the source of income taxes and jet fuel costs to help boost the tourism sector in India. The company also expects a streamlining of the 2024 Interim Budget’s Goods and Services Tax (GST) rates to make hotels more affordable for visitors and tourists.
Edited excerpts from the interview: 1. What are your main expectations for the 2024 interim budget, which is likely to have an effect on the travel and tourism sector in the short term?Will any of the political announcements have an effect on the industry next month, before the code of conduct and style comes into force?
Firstly, a weighted source of income tax deduction as well as GST input tax credits on the CSR budget earmarked for tourism destinations will inspire greater participation from the personal sector. This symbiotic dating not only helps maintain tourist sites but also ensures overall sustainable development. .
Secondly, addressing the challenge of overcrowding in popular destinations, the Hon’ble Finance Minister could encourage corporations to invest their CSR funds in improving tourist destinations. This can lead to developing new attractions and upgrading existing ones while offering tax benefits to the corporations involved. The government should also offer tax incentives to hotels and homestays for adopting sustainable practices.
Also, learning from our Asian neighbours, implementing visa-free entry for tourists from India’s top 15 feeder markets can help substantially increase foreign tourist arrivals. This initiative will not only put India on a competitive footing in the global tourism market but also foster a reciprocal environment.
2. What are the demanding situations faced by service providers in terms of taxation?How do you think the government deserves to rationalize TCS and GST input credits for the tourism industry?
The lack of GST credits for the hotel structure in India is a significant obstacle to the expansion of the country’s hotel sector. Streamlining GST rates and allowing GST credits can lead to more hotel stays. Such a move would not only make accommodation more available to tourists. but it would also strengthen the source of selected hotels in India.
The finance minister should also take this opportunity to remove all disparities between Indian and overseas Online Travel Agencies (OTAs) and different modes of payment. For example, OTAs operating a permanent establishment in India are mandated to collect 20 per cent TCS for spends above ₹7 lakhs by an individual in a financial year on overseas travel including tour packages.
On the other hand, foreign-founded OTAs do not collect TCS, and the non-applicability of GST or direct taxes allows them to offer lower prices to Indian citizens. Differential regulations, which give unfair merit to foreign-founded entities, will need to be addressed.
Similarly, disparities between e-commerce operators and e-commerce providers in the domestic market will also be eliminated. For example, currently, a visitor will pay 5% GST when booking a bus without air conditioning through an e-commerce platform. Payment is 0 for a direct booking with the bus operator, regardless of whether it is made in online or offline mode. This goes against the spirit of Digital India.
3. The value of ATF decreased by 4% in January for the third consecutive month. Despite the price cuts, how do you think the government can help airline operations manage their costs effectively? What VAT reduction do you foresee for jet fuel?
Aviation jet fuel (ATF) accounts for a significant portion of the airline’s operating charges. While the central government has encouraged state governments to reduce VAT on ATF, the Minister of Finance would possibly approve a broader policy framework that indirectly affects the ATF charge, such as excise taxes and central tariffs.
The relief at ATF may simply catalyze a domino effect, expanding the frequency of air travel, increasing airport revenues, and achieving better connectivity to tourist destinations. Improved accessibility can particularly stimulate tourism, benefit local economies and contribute to the national economy. growth.
4.MakeMyTrip delivered its highest-ever quarterly gross bookings and revenue in the December quarter led by high demand in leisure travel bookings. Going forward, what will be the growth drivers for the company in 2024 – with the year having impending events including general elections and 2 budget sessions?
Our bus ticketing business witnessed robust growth in the December quarter. redBus is now also available in Hindi, giving us a higher share of new customers from tier 2 and tier 3 towns particularly for bookings on Road Transport Corporations (RTCs.)
We continue to work with state RTCs to bring them online. The stock of government controlled buses on our platforms has increased, particularly with the integration of UP State RTC and additional stock made live through Kerala and Telangana RTCs. A new RTC, Chandigarh Transport Enterprise, also came to the platform this quarter.
We have carried out real-time RTC stock prestige generation optimization to reduce booking errors. The overall sentiment among private bus operators is also very positive on supply and we expect a stable increase in personal bus supply in the coming quarters, which will help drive growth.
5.Are there any new complaint-resolving mechanisms in place for 2024 to enhance user experience? How will MakeMyTrip leverage automation and artificial intelligence (AI) to adapt with the evolving market trends and maintain an edge among competitors?
As the demand for business class and premium economy class tickets shows an increasing trend, we have completely revamped the business class conversion funnel for foreign flights to provide a greater booking experience to our premium users and satisfy their desires and preferences. expresses.
We have introduced an industry-first enhanced booking procedure for business class airfares, where consumers can get a visual review of cabin comfort, meals, in-flight entertainment and amenities.
We have also strengthened our UAE proposition, where consumers now have the option to seamlessly acquire a UAE eVISA for their foreign flight booking procedure on our desktop site. The first reaction to this query was positive and this feature will soon be introduced in our apps as well.
Finally, we have enhanced our value locking capability to now include multi-contract value locking, where consumers can access other periods during which values can be locked. We’ve also improved the booking experience for multiple rooms. Users now see tips for more suitable room combinations and can explicitly specify their preferences, simplifying their decision-making process.
6.Reports say that the tourism sector is projected to contribute $250 billion to the country’s GDP by 2030. However, after COVID-19 pandemic and geopolitical conflicts which stood out as big headwinds, how well do you see your company contributing to the sector in the next 2-3 years?
Despite the short-term headwinds, our growth on a flown basis at 7.2 per cent quarter-on-quarter, outpaced the market growth of six per cent, allowing us to consolidate our market share at +30 per cent levels in the domestic air market. As to our international air ticketing business, we have not only fully recovered but have started to grow above the pre-pandemic peak.
On the source side, we continue to expand our offering and now offer more than 78,000 domestic homes on our platform. In terms of overseas business, we have announced new direct flights to destinations such as Tashkent, Baku and Bali in the December quarter.
Departures from India have returned to pre-pandemic levels and expansion momentum is expected to increase in the coming quarters and years. India is expected to become the fifth largest source market by 2027. This is expected to lead to India being the fastest developing component of overall Indian spending.
Disclaimer: The reviews and recommendations above are those of individual analysts, experts and brokerage firms, and not Mint. We advise investors to consult qualified experts before making any investment decisions.
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