Beautifying - Federation of Hotel and Restaurant Associations of India

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FDI
Shot in the arm
The recent increase
in Foreign Direct
Investment (FDI) in
hospitality will be a shot
in the arm of this sector.
Many hotel experts feel
this can only boost this
sector to newer heights,
the only saving grace
during the depreciating
rupee moments.
MEGHA PAUL
Nakul Anand
President
Hotel Association of India
Kamlesh Barot
Immediate Past President
FHRAI
July 2013 I www.fhrai.com I
26
The interest of hotel companies
seeking to invest in India has
not appeared to wane. Joint
ventures are being announced,
expansion plans are getting drawn up,
both private equity and pension funds
are seeking to deploy capital, and newer
groups are looking to get a foothold in
the market.
This is also indicated by the Foreign
Direct Investment (FDI) in the nation’s
hospitality industry that has surged
in the last financial year, amidst an
improvement in investment climate.
According to the data of the Department
of Industrial Policy and Promotion
(DIPP), the sector has attracted FDI
worth US$ 3.21 billion during April
2012 - February 2013. The FDI inflow in
this sector in the last fiscal is significantly
higher as compared to the flow of
US$3.37 billion, which the country
received during the last 12 years ending
March 2012. The foreign inflows in the
hotel and tourism sector did not figure in
the DIPP’s list of the top-10 recipients of
FDI prior to September 2012.
Much-needed
govt boost
Talking about the recent development,
Nakul Anand, President, Hotel
Association of India says, “It is definitely
good news for the hospitality and
tourism industry. However, a lot needs
to be done even now. Besides taxation
and human-resource related issues, the
government needs to take more steps to
boost investment in this sector. There is a
need to look at land-related problems for
the hospitality sector. The recent DIAL
hotels’ issue also needs to be solved as
quickly as possible.”
According to Kamlesh Barot,
Immediate Past President, FHRAI,
unfriendly tourist taxes and policies
will only detract FDI in the sector.
“The previous few budgets by the
Centre have not only increased taxes
on accommodation, but also on food &
beverage. Only a few states like Odisha
have actually made tourism-friendly
initiatives at the government level. The
rest of the states feel that by making tax
percentages higher, they would gather
more revenue for their exchequer. India
is a great tourism market, and that is
propelling investor interest. International
investors typically demand greater
research of the market and greater
transparency, which the country needs to
build into its system. We rank 132 out of
165 in the business-friendly index across
the globe,” he informs.
Unknowingly, many tourist-unfriendly
practices like the FSI and operating-time
regulations under the pretext of security
in prime tourist spots like Mumbai,
drive investments away from the entire
state. “If the government focusses on the
industry, we can leave the Information
Technology industry far backward.
But the government needs to prioritise
hospitality, as Karnataka flourished
bringing IT to the fore. If we remove the
transaction of last year, the FDI inflows
would drop to about 300-400 million
dollars, which is broadly in line with the
trend in previous years,” he adds.
Filling the gap
Responding to the FDI increase, Barot
remarks, “The challenge for FDI investors
is that most international hotel operating
companies would prefer to operate and