‘Cash-for-LTC a big blow to tourism’

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While the tourism sector has termed Finance Minister Nirmala Sitharaman’s cash-for-LTC announcement a ‘major blow’ to the sector, the patron durables sector has welcomed it together with the pageant advance scheme, calling these a lift to client sentiment and financial exercise. However, specialists warn that this ‘boost’ is prone to be non permanent and the measures could also be insufficient to maintain demand.

The Federation of Associations in Indian Tourism and Hospitality (FAITH) mentioned the federal government’s transfer to redirect LTC funds to client items was a “vote of no-confidence” for the sector, which is among the many worst-hit by COVID-19. After eight months of virtually zero tourism exercise, the business was anticipating the festive season to offer the sector a lift. However, the federal government’s determination is prone to sap funds that might have gone into journey, FAITH mentioned.

“The government’s move is contrary to our suggestions where we demanded that LTAs be used to incentivise travel. But the government announcement will discourage travel as even those who have savings would like to encash their LTAs,” mentioned Jyoti Mayal of the Travel Agents Association of India (TAAI). An business supply nonetheless, mentioned there can be no materials influence on the business because the LTA cash wouldn’t have come to the journey business in any important manner earlier than March 2020. FAITH added that since this can be a four-year block scheme, it can additionally reduce away funds for future journey demand for the subsequent 12 months.

On the opposite hand, Kamal Nandi, president, Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head & EVP, Godrej Appliances mentioned, “The special festival advance schemes will provide more liquidity to the customers for discretionary spends. With the upcoming festive season, this will augur well for the consumer durables segment.”

‘Not sustainable’

Edelweiss Research mentioned in a notice that the general fiscal outgo owing to those measures quantities to ₹400-500 billion (0.2-0.3% of GDP). However, this isn’t a recent fiscal enlargement as the federal government is sticking to its present borrowing programme. “Therefore, while the measures could support sentiments and demand during the immediate festive season, they may be inadequate to boost aggregate demand sustainably… more [is] needed for sustained recovery,” it added.

Aditi Nayar, principal economist, ICRA, mentioned she anticipated the announcement to end in a brief enhance to client sentiment and financial exercise, with sharper pick-up in festive season gross sales that will “subsequently fizzle out”.

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