Indian tourism begins to feel the pinch from cash crunch

People queuing outside banks in Hyderabad last month to deposit banned notes

The inbound trade in India is beginning to observe fallout from the government’s demonetisation drive and fear that business will be considerably affected if the cash crunch is not resolved soon.

On November 8, the government declared all currency in denominations of Rs500 (US$7.40) and Rs1,000 illegal tender in hopes of curbing the flow of black money in the Indian economy.

“Though a welcome decision, this is a matter of concern for the inbound sector. Foreign tour operators and tourists are raising doubts before booking their holidays to India because they’ve been seeing visuals of long queues outside banks and ATMs in the media,” Ravi Gosain, managing director of Erco Travels said.

“Most of the foreign tourists who book through tour operators pay in advance for their tours but still they need cash for buying souvenirs and paying tips.”

Gosain is not seeing any decline in enquires or arrivals, but said the situation could change if the cash crunch persists.

Louis Dsouza, executive director of Tamarind Global, is already witnessing effects of the currency crisis. “Some foreign tour operators have dissuaded guests from travelling (to India) till we tide over the issue,” said Dsouza, who is concerned about the availability of Indian currency at ATMs and across hotel counters.

The impact on tourism is especially palpable as a number of historical monuments managed by Archaeological Survey of India (ASI) accept cash as the only mode of payment, posing a challenge for tour operators when they book for groups.

“Entrance fee for a few monuments managed by ASI can be made online, but the website is unable to handle the (volume). This is a serious problem that is giving bad name to India,” lamented Gosain.

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