February 2, 2017 12:00 pm JST

Singh and Sharma: India is missing the boat on lucrative tourism trade

Nation must change its image as dirty, unsafe and overpriced

India lags far behind China in attracting tourists, despite its diverse geography, rich cultural heritage, mouth-watering cuisines, cheap labor and favorable exchange rate.

An increase in tourist arrivals could support economic growth and create new jobs, which would be especially valuable at a time when India is struggling with high rates of unemployment, especially among young people. But the sector is not getting the kind of regulatory attention it deserves.

India attracted 8 million foreign tourists, well under 1% of the global total, in 2015. In terms of international tourism receipts, it grossed just $21 billion, which accounted for only 1.6% of the global total. In contrast, China excluding Hong Kong received 56.9 million tourists, or 4.7% of the global total in the same period. It earned $114 billion in foreign exchange, or 9% of the global total, from servicing foreign tourists.

The government has not done much other than to launch "Incredible India" and "Clean India" campaigns to address infrastructure bottlenecks and concerns about hygiene and safety. New Delhi needs a multi-pronged strategy involving all stakeholders to make traveling to India cost-efficient and safe if it really wants a larger share of the global tourism pie.

BAD PRESS Many Indians believe that India gets too much bad press, damaging its image as a tourist destination. But the problem may not just be one of perception; the grim reality in India also discourages visitors from coming.

Badly maintained roads, slow traffic and reckless driving can easily scare any visitor. Filthy and overcrowded railway stations add to the difficulty of getting seats on trains. This is problematic because internal flights are often very expensive and infrequent. That could put off tourists who might otherwise be keen to visit.

India's hotel rooms are among the most expensive in the world because of inadequate supply, high taxes and the owners' tendency to overcharge tourists, especially foreigners. There has been some improvement on this front, but India still suffers from a comparative cost disadvantage. India is ranked 52, compared with China at 17 and Malaysia at 25 in the World Economic Forum's Travel & Tourism Competitiveness Index 2015.

Dirty beaches, temples, historical monuments and public transport also push tourists to other places, as does the rising level of pollution.

Perception surveys reveal that India is seen as one of the most dangerous places for women. For instance, India tops the 2016 list of worst countries for women travelers, according to data compiled by International Women's Travel Center, a travel advisory for women travelers.

Per capita, India suffers fewer crimes against women than many developed countries, according to the United Nations Office on Drugs and Crime, but that may be due to under-reporting and the exclusion of figures for marital rape. India also has a low conviction rate for rape of just 26%, compared with 50% in the U.S. Poor policing makes it hard for victims to report crimes, and gives an impression of lawlessness. Against this backdrop, there are few solo female travelers to India, compared with other destinations.

In addition, international tourists must pay what is sometimes called the "foreigner tax" in Asia. Most historical monuments and tourist sites charge foreigners higher entry fees, sometimes as high as 10 to 20 times what locals pay.

In the short term, the government's demonetization of high-value notes has also had an impact on tourists, who found themselves unable to cash travelers' checks or to exchange old notes for new ones. Videos on social media documenting foreigners' troubles in this respect do not help India's image problems.

MILKING THE CASH COW The government can do much to boost the sector. At the moment, it sees tourism as a cash cow and milks it by imposing high taxes while ignoring the fact that it is a highly competitive global industry in which all spending is discretionary. High costs without commensurate service levels simply discourage foreign tourists.

One solution would be to impose lower levies and rely on the sector's multiplier effect to compensate for revenue losses incurred through tax cuts. That would create jobs both directly and in upstream and downstream industries.

In terms of improvements in the industry, hotel accommodation in India needs to be competitively priced to make traveling cost-efficient. The government could help the sector by taxing it at a lower rate under the country's proposed goods and services tax.

Although 100% foreign direct investment is allowed in the hotel and hospitality sector, permits and licenses to operate are difficult to get. The government must ease the process because only an increase in the supply of hotel rooms can bring down prices on a sustainable basis. It could also encourage the growth of online home-share and hotel websites such as Airbnb and OYO Rooms, and taxi apps such as Ola and Uber, which help to reduce costs for tourists.

The safety of tourists must also be addressed, especially for women traveling alone. India could consider creating a separate and better trained tourist police force. In terms of hygiene and attitudes towards tourists the local population could be educated through public awareness programs and the imposition of heavy penalties for dumping garbage in open spaces.

The government has got some things right, including the introduction of e-visas in November 2014, initially for visitors from 40 eligible countries. The list is now extended to the citizens/passport holders of 150 countries arriving at 16 international airports. Such visas are given to tourists, people visiting friends and family, and those undertaking trips for medical treatment or business.

However, the government also needs to do more to target the small number of countries whose residents spend most on overseas tourism. In 2015 the top spenders were China at $292.2 billion, the U.S. at $113 billion, Germany at $77.5 billion, the U.K. at $66.3 billion and France at $38.4 billion. Together, these five countries accounted for 40% of global expenditure on international tourism; soothing their specific concerns could go a long way toward increasing India's tourism receipts.

Finally, by facilitating India as a hub for cheap but high quality medical treatment the government could attract many more foreign visitors from developed and developing countries which do not have such facilities at comparable costs. The Indian government could task its embassies and consulates overseas with promoting medical tourism to overseas patients by making it easier to get visas.

There is one other important issue: India has been reluctant to issue visas to Chinese citizens for security reasons. Given the dominance of China in outbound tourism, this is a concern that India cannot afford to overplay. The inclusion of China in the e-visa program is a good step forward in attracting the growing number of Chinese tourists, the biggest spenders of all.

Ritesh Kumar Singh is a corporate economist and former assistant director of the Finance Commission of India. Prerna Sharma is vice president and head of agriculture, food and retail at Biznomics Consulting, a research and policy advocacy specialist in Mumbai.

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