Demonetisation and Tourism
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A month ago on 8th November 2016, the Government imposed demonetisation of INR 1000 & INR 500 notes. India has always been termed as “cash driven market” and these notes were nearly over 86 per cent of the total currency circulating in the market. The people holding such currency were allowed a window upto 30th December 2016 to either exchange limited amounts with new notes or deposit such notes at the bank. This measure instantly created a panic situation and India saw many people lining outside banks to ensure they are able to exchange or deposit their old currency notes.
Since the new notes are continuing to be in short supply, a month after also, the people are still outside banks and ATM’s to withdraw new currency notes and situation currently is that India is facing (cash) currency crunch.
Since India has been cash driven economy and with not all the people have access to Banking System, the impact on economy has been widely felt with slow down in each and every sector / industry.
The Economic Impact
The Reserve Bank of India has downgraded the GDP growth estimates from 7.6% to 7.1% for the year 2016 – 2017
From Automobile, Hospitality, FMCG, E-Commerce, Luxury Market, Gold, Entertainment and Real Estate and almost all sectors are currently witnessing slow demand and negative growth.
The worst impacted is the informal sector which constitute over 80% of the Indian Market and provides jobs to nearly 90% of the people. This includes the daily wagers, labourers, farmers and the people at the bottom of the society pyramid.
The sentiments are negative and currently most people are busy trying to handle the business requirement on urgent basis and rest all can wait.
The political Impact
Since the day this announcement was made, Parliament has seen united opposition from all the non-ruling parties. The parliament has been in session since 16th November 2016 and there has been almost negligible work completed during this session and experts & media are expecting almost total session being wasted with either no bills or very little being achieved during this period.
The Impact on Travel & Tourism
Though it is currently difficult to ascertain the quantum of impact on each segment, the situation has definitely impacted Inbound, Outbound as well as Domestic Travel & Tourism.
Below are the pointers related with travel & tourism facing the impact :
Airlines – Domestic airlines sensing the drop due to prevailing situation had started offering discounted tickets.
Business Travel – Be it within the country or overseas, business travel is continuing from the corporate offices; however the businessmen sourcing materials from within the nation and overseas for trading etc is impacted.
Students Travel – This segment continues and currently it is the time when Indian students do join the foreign universities and educational institutes. However, this travel is mostly limited to UK, USA, Canada, Australia, some other parts of Europe and Singapore etc.
MICE – The various PCO’s and event organisers are continuing to get enquiries from corporate for MICE activities, however, some did mention that numbers are reducing. Another notion is that major MICE movements will be post the results of this financial year and actually gear up for June 2017.
Leisure – A trip can wait, driven totally by the sentiments, this segment is affected with either very few new enquiries being generated at this point of time. There have also been reports of cancellation of booking in this segment. The bookings for which the payments are already made are going ahead. Luxury leisure expected to continue.
Niche Travel – This travel segment is mainly dependent on the very high-end strata of the society, this may continue, as this segment doesn’t depend on the cash flow only.
Honeymoon Travel – Mostly considered as once in a lifetime trip, the couples are continuing to travel, however there has been some curtailment on the funds being used for this segment.
We are estimating that till March 2017, there can be a slowdown and only essential travel will be the priority; however the main summer season will hopefully witness a spurt in travel once again from India. However, this depends on other steps that government may take post demonetisation. Currently, there is a huge push towards digital payments and transactions from the Government to tie over the situation of Less Cash in the market.
The higher strata of the society will continue to maintain their lifestyle and will travel as per their plans, as they continue to have their resources and deep pockets.
(Rajeev Nangia is the Chief Operating Officer of TRAC Representations (India) Pvt. Ltd.)