Travelling down with the rupee

According to the Ministry of Tourism data, foreign exchange earnings for August 2013 came to $1.294 billion.

Even though the rupee’s freefall has translated into savings of 20 per cent for foreign travellers and an average 7 per cent increase in the number of inbound travellers in July and August (over the same months last year), Indian tourism’s woes are far from over. The rupee depreciation means lower foreign exchange earnings (FEE) in dollar terms, even as the downturn hampers the overall growth of tourism.

According to the Ministry of Tourism data, foreign exchange earnings for August 2013 came to $1.294 billion. Compare this with  an FEE of $1.306 billion in August 2012 and $1.264 billion in August 2011. “The negative growth in FEEs may be due to the depreciated value of the rupee in August 2013 as compared to August 2012,” states ministry data.

“Yes, it’s a major concern as forex earnings have been low. But the silver lining is that there has been an increase in the number of foreign tourists. Since we can’t do much about the fall in rupee, we are focusing on increasing the number of foreign travellers and domestic tourism which is not impacted by rupee volatility. That should bring in some much needed revenue to the travel industry too,” said a top official in the tourism ministry.

To attract more foreign tourists, the ministry has been pushing for liberalization of visa norms. Tourism minister K Chiranjeevi has already emphasized that inbound  tourism will help in bridging the foreign exchange crisis that the country is facing.

Till now the countries which have been extended visa-on-arrival facility by India are New Zealand, Singapore, Japan, Finland, Luxembourg, the Philippines, Cambodia, Vietnam, Laos, Indonesia and Myanmar. This measure was introduced by the Ministry of Home Affairs in 2009. Initially, the offer was restricted to passengers landing at Delhi, Chennai, Kolkata and Mumbai. Last month, the service was extended to Bangalore, Hyderabad, Kochi and Thiruvananthapuram airports as well.

The Planning Commission has called a joint meeting of ministries of home affairs, external affairs, tourism and the national security advisor in the first week of October to improve access for foreign tourists and cut down bureaucracy.

Foreign exchange earnings from the tourism sector are under the spotlight as they can go a long way in improving country’s current account deficit (CAD). During 2012-13, the CAD was at an all-time high of 4.8 per cent of GDP or $88.2 billion. According to industry body Assocham, foreign exchange earnings from the tourism sector are likely to reach $26 billion by 2015 from the current level of $20 billion, growing at a compounded annual growth rate (CAGR) of about 13 per cent. “The foreign exchange earned through tourism is critical to combat the rising CAD and as such the government should look to boost foreign tourist inflow by easing its strict visa regime, entering into an agreement with various countries through embassies and high commissions to strengthen tourism cooperation aiming at destination development, promotion, marketing and capacity building,” said DS Rawat, secretary general of Assocham.

Assocham’s recent report also lays emphasis on the importance of tourism as one of the major foreign exchange earners. It pointed out that the sector, with over $17 billion earnings, was India’s fourth biggest foreign exchange earner in 2012 after petroleum exports (at $60.8 billion), gems and jewellery ($43.3 billion) and transport equipment ($18.3 billion).

Even though the government is worried about the low foreign exchange earnings, travel players say the weakened rupee has definitely brought in more foreign tourists to the country.

“We have seen our inbound travel business grow by 35 per cent on the back of a weak rupee. For the upcoming travel season too, bookings are coming in, especially from the US and Europe. The downturn has had a bit of an adverse impact but mainly on leisure travel,” says Sharat Dhall, president of Yatra.com.  

The hotel industry too has been grappling with the downturn that has impacted corporate travel. The sector is pinning its hopes on the upcoming travel season (October to February) which is the peak season for meetings, incentives, conferences and exhibitions.

“There are positive indicators as the corporate business in the US is getting stable. But business travel from Europe is still weak. The average room rates are down by 8-15 per cent, even though the occupancy rate has not seen a dip,” says KB Kachru, chairman, South Asia, Carlson Rezidor Hotel Group. Carlson owns and operates brands such as Radisson Blu, Radisson,  Park Plaza and Park Inn.

Keyur Joshi, co-founder of travel portal makemytrip.com, says the falling rupee is good news for the inbound foreign traveller but the absence of a well laid-out tourism policy comes in the way of harnessing India’s full tourism potential. 

“We are not even scraping 5 per cent of our potential, whereas countries as small as Thailand, which is the size of Madhya Pradesh, are way ahead of us.” Joshi feels India should de-regulate its skies to create more international air capacity which will in turn lead to cheaper tickets for the huge diaspora that resides abroad. At present inbound air travel has a sizeable population of corporate travellers.

Joshi also feels India has a regressive visa policy that impedes the inflow of foreign tourists. “We offer visa-on-arrival for tourists from very few countries, that needs to be changed,” he says.

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