In the words of Dr. Vijay Kelkar, advisor to Finance Minister Jaswant Singh, the industry has suffered from neglect because it was treated as an industry serving the elite instead of being accepted as a means to provide employment with the highest multiplier effect. An indication how the industry has suffered is obvious as the occupancy of hotel rooms, which stood at 71.1 per cent in 1996, fell to 50.1 per cent in 2001 and to 50.04 per cent in 2002. On top of it, if war breaks out in Iraq, the industry will head for certain disaster.

The non-performing units are also suffering because mergers and acquisitions are not easy in the hotel industry, as transfer of losses is not permitted under the existing rules. This facility is allowed in other industries and helps the financial institutions in recovering their dues. The decline in traffic is evident from the fact that while the number of tourists stood at 2.64 million in the year 2000, it fell to 2.51 in 2001 and in the current year it has come down to 2.35.

With the declining fortunes of the industry, provision for depreciation has come down to 10 per cent against 20 per cent which has been the norm so far. One way out of the current crisis is that tourism should get the status of an export industry as nearly 60 per cent of its earnings are in foreign exchange. This can make a big difference to the industry, particularly in building infrastructure. In the current set up, hotel groups concentrating on tourist circuits have suffered the maximum as indicated by the balance sheets. The groups like Taj and ITC, concentrating on business travellers, have done reasonably well while the Oberois which invested in luxury properties in tourist destinations have reported the worst results.

The industry is hoping that Finance Minister Jaswant Singh will come to their rescue in the forthcoming budget as the Planning Commission as well as the Prime Minister have recently looked at tourism favourably and are advising the States to encourage it with a view to provide employment in remote areas. The budget allocation of the Tourism Ministry is also expected to rise considerably so that India could make a serious effort in becoming an attractive destination in days to come. The biggest obstacle facing the industry is the high incidence of taxation. For instance, on representation by the industry the limit for expenditure tax has been raised from Rs. 2,000 to Rs. 3,000. But instead of levying it per person, it is now levied per room, which has increased its incidence instead of reducing it. The overall incidence of taxation on every rupee spent by a tourist is 30 to 40 per cent differing from State to State. This compares very unfavourably with other destinations in South East Asia where the impact of taxation is only four to six per cent. In the case of China, the biggest player in the tourism sector, there are no taxes at all.

The industry has been demanding that the Centre and States should tax the tourism industry at one point only instead of a multiplicity of taxes which not only pose a heavy burden on the industry but also cause unnecessary harassment. Yet another sore point is the imposition of luxury tax on food items, which forms one third of the total expenditure by a tourist. The food items invite sales tax plus luxury tax which make eating in hotels a real luxury. Besides direct taxes, the other inputs on tourism are also heavily taxed.

For instance, air travel in India is expensive because aviation turbine fuel is sold to airlines at a huge premium with a view to subsidise the sale of kerosene. The result is that travel within India is more expensive as compared to foreign travel. Any tourist wanting to visit Thiruvananthapuram from Delhi has to shell out more than for a journey to Colombo or Bangkok. This certainly is not an incentive for domestic tourism. It is as a result of these policies that while countries like Malaysia, Thailand and Sri Lanka have done well in tourism despite limited attractions, India has remained a bad number.

In the words of British Tourism expert. Prof. Christine Ennew, countries, through more innovative publicity and marketing, have been able to attract tourists in large numbers while India with its numerous attractions has not been able to make its mark. The problems facing the Indian tourism industry have been analysed in detail, but no action has been taken so far to correct them. The result is that India is suffering not only in terms of numbers but in its ability to attract tourists who have big purses.

At present, we attract a large number of backpackers with limited spending power. who are prepared to overlook shortcomings of infrastructure. The major shortcoming is that the Indian Government and people have refused to see the benefits of the tourism industry fully or realise its benefits. There have been a few isolated efforts by States like Goa, Kerala and Rajasthan, but a concentrated effort is yet to be undertaken.