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new Delhi4 days ago
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There is a huge expectation from the sector due to large contribution to the economy and latent demand due to lockdown.
- After the huge sales in the market in March, the total MCAP of tourism companies decreased to just 290 billion rupees.
- There is also a huge decline in MCAP of companies in the tourism sector due to the bankruptcy of many companies.
The tourism sector will play a major role in the country’s economic recovery expected in the next business year 2021-22. A report by brokerage house ICICI Securities said that there is a huge expectation from the sector due to the large contribution to the economy and the demand that has fallen asleep since the lockdown implemented in March 2020. The market capitalization (MCAP) of companies in the tourism sector has fallen drastically due to the bankruptcy of many local and international companies.
The report said that during the heavy stock market sales in March due to the epidemic, the total MCAP of the tourism sector companies included in the report decreased to a midcap share. Even after this, there has been a slight increase in the total MCAP of the listed companies in the tourism sector compared to all other sectors.
Hotels, resorts, tourism companies’ total MCAP reduced to one midcap stock
Strategy: The i-lens screener report said that after the market sales in March 2020 due to the coronavirus pandemic, the total MCAP of the 54 listed companies in the report fell to just 290 billion rupees. It is around the upper limit of the midcap range. These 54 companies are in the hotel, resort, cruise, casino and tour operator service sectors.
Tourism sector contributes more to the economy than the stock market
According to the Tourism Satellite Account (TSA) for India in 2018, the Gross Value Added of Tourism Industries (GVATI) accounts for 7.6% of the total GVA. Although Tourism Direct Gross Value Added (TDGVA) ie, tourism’s direct contribution to GVA was 2.78%, while it contributed 5.4% to the total employment generation. Tourism Direct GDP (TDGDP) contributed to 2.7% of GDP.
Tourism is a labor-intensive sector, it takes less capital
According to the report, the multiplier effect of tourism on GDP is 1.9 times and its effect on employment is 2.3 times. Due to this, the direct and indirect contribution of tourism is 5.35% in GVA, 5.2% in GDP and 12.4% in employment. The higher contribution to GDP means that tourism is a labor-intensive sector, while the output to capital stock of 0.84 means that there is less capital in this sector.
6.8% contribution to GDP in 2019
According to the World Travel and Tourism Council (WTTC), the travel and tourism sector contributed 6.8% to India’s GDP in calendar year 2019. At the same time, this sector contributed 8% of the total employment.