Page 46 - DMGT522_SERVICES MANAGEMENT

Unit 2: Emergence of the Services Economy

The share of the hotel and restaurant sector in overall economy increased from 1.46 per cent in Notes
2004-05 to 1.53 per cent in 2008-09 and then decreased to 1.46 per cent in 2010-11. However, if the
contribution of this sector only in the service sector is considered, its share decreased from
2.75 per cent in 2004-05 to 2.64 per cent in 2010-11 as other service sectors grew faster than this
sector. Its CAGR was 8.44 per cent during 2004-5 to 2009-10 and the growth rate in 2010-11 was 7.7
per cent. Health tourism, the new entrant in the sector, is a niche area where India has good
potential.
Table 2.5: Performance of India’s Service Sector: Some Indicators

Sources: Directorate General of Civil Aviation, Telecom Regulatory Authority of India, Ministry of Tourism,
Ministry of Shipping, Ministry of Railways and Central Warehousing Corporation (compiled by EXIM
Bank of India).
Note: GT is gross tonnage. (a) Calendar years, for example 2007-08 for 2007. (b) April–December.
(c) April–January. (d) As on 1 January, 2012. (e) Advance estimates by the Ministry of Tourism.
As is natural, with the growth of this sector, components like air travel and hotel stay have been
included under service tax. The Economic Survey 2010-11 has listed the major policy decisions
taken in recent years. However, a lot more needs to be done to make India a major tourist
destination. Some of the problem areas in this sector include the following. States impose
luxury tax ranging from 5 per cent to 12.5 per cent. In some cases, the luxury tax is applicable on
printed room rates whereas actual hotel rates offered to guests are much lower. With a view to
rationalising luxury tax on hotels, the Government of India has requested the states to work
towards rationality and uniformity of taxes so as to make their destinations more competitive.
They have been also requested to exempt room tariff below ` 2,500 from luxury tax and charge
luxury tax at a uniform rate of 4 per cent on actual tariff. Construction of hotels is primarily a
private-sector activity which is capital intensive and has a long gestation period. A major
constraint being faced by the hotel industry in addition to the high cost and limited availability
of land is the procurement of multiple clearances/approvals required from central and state
government agencies for hotel projects.
Varying from state to state, in some cases as many as 65 clearances/approvals are required for
hotel projects. A Hospitality Development and Promotion Board have been set up at central
level. The main function of the Board will be to monitor and facilitate clearances/approvals for
hotel projects both at be a single window for receiving applications for various clearances,
approving/clearing hotel projects in a time-bound manner, and reviewing hotel project policies
to encourage the growth of hotel/hospitality infrastructure in the country. State governments
have also been requested to set up similar boards under the Chairmanship of their Chief
Secretaries. So far Mizoram, Manipur, and Maharashtra have set such boards. Other measures in
this sector could include rationalising the fees for entry to monuments and using the fees for
their maintenance; focusing on safety of tourists; and promoting wellness tourism.

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