Sushma Ramachandran

The hospitality industry is facing an enormous crisis owing to the repeated Covid waves that have forced shutdowns of hotels and restaurants throughout the country. The setback to this sector is mirrored in countries around the globe that are imposing curbs on movement to contain the spread of the new highly contagious Omicron variant of the Covid virus. But the situation is more acute in this country simply because of the number of people employed in this segment of the economy. Estimates given out by hotel and restaurant associations pegged the jobs at 7.3 million in March last year. But now the Industry has assessed that as many as 2.5 million jobs in the sector have been lost as numerous establishments closed down while others are working with reduced staff. There has thus been a severe impact on livelihoods, especially in urban areas.

The sudden rise in infections since December last year due to the new variant has resulted in yet another setback, just as the industry seemed to be returning to some kind of normalcy. The upsurge occurred at a particularly bad time for the industry as it was the year-end when hotels and restaurants whether tiny, mid-size, or luxury establishments, were fully booked, giving rise to hopes of a revenue bonanza. The festivities were initially scaled down but the new norms on guest numbers meant that many private parties and wedding celebrations had to be canceled. This in turn meant that ancillary agencies connected to these occasions lost out and were unable to use the new year celebrations to recoup past losses. From photographers to flower suppliers to tent agencies, countless small enterprises were left in the lurch at the last minute.

The situation has worsened in recent days as restaurant curbs have moved from operating at 50 percent capacity to complete closure in major metros like Delhi. Restaurant industry representatives are rightly complaining that the decision to close dine-in operations and shift to deliveries-only is strange when buses and metros are being allowed to operate at 100 percent capacity. Similarly, airlines are running with middle seats being occupied throughout flights. It seems as if state governments are imposing curbs on the hospitality industry in a knee-jerk reaction to the rise in infections without a deeper assessment of the adverse effect on livelihoods.

 

Although the curbs have been imposed just recently, restaurant owners have already had to let go some staff. About 30 percent of those employed in the restaurant industry have been rendered jobless. Hotel and restaurant associations say this might be the final blow for the sector that has seen a prolonged slump in operations right from the first countrywide lockdown in March 2020. Even though state governments say their effort is to ensure that livelihoods are not affected, the latest restrictions have actually done so.

It is in this context that the findings of the Centre for Monitoring the Indian Economy (CMIE) are relevant. It has been found that the rate of joblessness has risen more rapidly in urban as compared to rural areas. The latest data shows that the unemployment rate has risen to a four-month high of 7.9 percent in December. The rate for urban areas is 9.3 percent and for rural areas is 7.28 percent. The CMIE has also noted that the quality of jobs has been declining over the past two years. Better quality salaried jobs in urban areas have been dipping while poor quality unskilled jobs in rural areas have been increasing in contrast.

Such data needs to be taken into account by policymakers at both the central and state government before finalizing policies linked to Covid related movement curbs. Since the aim is to ensure that normal life continues as far as possible to prevent job losses, it would be advisable to treat the hospitality industry with greater sensitivity.

Probably one of the mistakes made by those in positions of authority is to assume that the hotel and restaurant industry is a luxury activity that does not come under the category of essential services. This is a sector that has a wide range of establishments employing millions of people. Right from the smallest of dhabas to the five-star hotels, this sector covers a wide cross-section of the population. It does not merely cater to the rich or even the middle-class segment of society. It provides a critical service for those at the bottom of the pyramid in cities. Migrant workers, for instance, rely on small restaurants or street food vendors for their daily meals during working hours. 

 

The wide swathe of this segment of the services sector is akin to the deep spread of the small retail or Kirana stores in the country. The level of employment, largely on an informal basis, is also extremely high. The closures during the pandemic have led to financial losses of the order of Rs. 1.3 lakh crore during 2020-21, according to preliminary industry estimates. This is apart from the job losses that had been a major contributor to the mass migration of workers from urban centers to rural areas during the lockdown.

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It is thus alarming that not much has been done to provide financial relief to this sector in the series of relief packages unveiled by the government last year. For the coming budget, the industry has urged that some supportive tax concessions be provided to help it weather the ongoing crisis. There is no doubt that these pleas need to be given serious consideration, given that the hospitality industry has a significant role to play in boosting economic growth and reducing unemployment levels.