 Hello and let's talk about vacations or the lack of them rather. The past few months have dashed the hopes of many middle class and upper middle class families who would have been planning to travel to various parts of the country and even abroad. This phenomenon would have had an even more severe impact on the huge tourism and services industry in the country. Now this includes those who own hotels, those who work in small shops, act as guides at tourist spots, sell souvenirs etc. The cumulative impact of this will be quite huge and will have a long-term effect on our economy in ways that may be a bit hard to visualize now. We talked to journalists on Indio Chakravarti on this issue. Thank you on Indio for joining us. So today's discussion is about vacations. Have you had any this year? It's been kind of crazy. It's been a long vacation at home. I don't mind not leaving at all. I love being at home. Rest of my family is really unhappy about it. Because they are not being able to leave and other is that they have to be with me. Right, absolutely. And it's kind of, it's almost become a habit. But yeah, so generally what you call, of course we look at vacations in terms of the psychological impact in terms of memory. But vacations also have a very key economic aspect to play and not only for the family concerned in terms of memories, but also for a whole number of people. So what we're probably seeing is that that whole sector is going to be really badly hit. It's probably already been hit and it's continuing probably to get worse as this festival season has come and a lot of revenue is kind of completely vanished. Yeah, so if you look at it, I think right in the beginning with the lockdown started within a month, Fikki had come out with a report and it said that there'll be a hit of about 5 lakh crore in revenue to the tourism and hospitality industry, which means the entire tourism industry and hotels, of course, which is a big part of the corporate part of tourism industry, 5 lakh crore. And their estimate was that between 3.5 to 4 crore people will lose their livelihood. Now that doesn't mean that directly people who are attached to the tourism industry, but people who supply, for instance, you know that there are many dhabas which buy from local vegetable vendors and they buy in bulk. So when that doesn't run, then the vegetable vendor is affected. So there's an entire supply industry to the tourism industry which gets affected. But what interests me even more than that is not what the losses are, but what the gains are for sure. Of course, that would probably mean, if you look at it, when we all go on holidays, when was the last holiday you took? Incidentally, I had a surprise two day break a couple of weeks ago, but otherwise it's been years. I'm the wrong person to ask on this question. All right. So for me, we've been taking holidays, several of those holidays tend to be abroad. That's also within India. I went to Jim Corbett last year, I went to India last year. So what happens is that you really don't calculate how much you've ended up spending. You think, yeah, this is an additional expenditure, but you don't really work it out into a monthly expenditure. No one does. When you work it out into your monthly expenditure, it's actually quite a lot. And if you don't go on a holiday, you don't realize that people go on holidays when they're especially people with families in summer vacations. Every time the schools are shut or you know, colleges are shut. So summer vacations are a big thing. Winter vacations, this entire Diwali, the Sharadurga Pooja period is the time when people go on short trips. So these are periods when you spend money, but you don't really look at it in a monthly basis. You look at it as an annual expenditure. And it goes out of your bank balance. You pay for tickets and stuff like that. Sometimes you get reimbursed as in the case of government servants, for instance. Now, what happens is that summer vacation is gone. No one. Durga Pooja, the Sharadurga Pooja period is gone. Not more than 20% of people who would have otherwise gone and break have gone. Now, this entire thing is largely a middle class. And if I look at a few communities, Gujarat, for instance, and Bengalis, they're even low middle class people go on holidays and trips, low cost trips, but they do go. Otherwise, it's largely a middle class to affluent middle class, the upper middle class. These are the people who go. Now, we would, how much do you think that Indians spend on leisure travel? Any idea? How much do they, households and elsewhere? So I actually did a bit of a kind of research and found out that there was a report produced by Bain and Google in 2019. And that report looks at the, looks at amount of spending spent on leisure travel and tourism overall. So it puts business travel and leisure travel. The leisure travel part of it in 2018 was $57 billion, $57 billion. And they said that it increases, it has been increasing at the rate of 13% per year, leisure travel expenditure or travel expenditure. So if one takes $57 billion in 2018, one would assume that in 2019, that's gone up to between $64 to $65 billion if expenditure has gone up by 13%. Now, we know that in 2020, of course, lockdown happened very quickly. And therefore holidays didn't take place. Even holidays were at home. People didn't go out. So let's assume that, and there was a recession, middle class incomes have gone down. If middle class incomes have gone down by 10%, let's assume that if people were not scared of going out, that this was recession caused by something else, like let's say an oil shock, right? That's happened in the late 70s. And this is nothing to make people worried about going out and spending. Then they would have spent 10% less than last year. So we come back to about $58 billion. This is an important number. $58 billion is $4.3 lakh crore. Now, how much that is just back of the envelope. Guess how much that is of the GDP? Numbers. Yeah, numbers. Okay. All right. So our GDP is close to $200 lakh crores. So that is about 2% or more, 2% or more, the GDP. But GDP is a net income. This is revenue. This is total expenditure. So some of it would be passed and stuff like that. Not all of it would work out for this income. But still, and some of it is of course spent, which is not the country's income. If I look at it, then out of that 4.3 lakh crore, which people would have spent this year, despite the recession, I'm reduced it by 10%. Let's assume that only 20% is spent. Even then about 3.5 lakh crore rupees worth of money has not been spent, which has been earned. I'm saying 10% drop in income, earned but not spent because ultimately people spend out of the disposable income, middle class, affluent classes that has suddenly gone up in their bank balance. That suddenly appears in their bank balance because most of that expenditure would have taken place in the summer holidays and this particular vacation period. Some of it, of course, in winter and even that won't happen. So if you look at it, approximately 3.5 lakh crores is lying. It's going to end up being in the bank balances of the middle class. More for richer people, less for middle income people, those who have lost their jobs, obviously nothing because if they can pay cuts more than 10%, obviously there will be less. There are people who have got back their pay cut, so maybe it will be more. On an average, it'll be that much amount. Let's say that this end up spending 60% of it and save 40%. 60% of that is more than 2 lakh crore, which is 1% GDP. And if I actually look at the total market size of white goods, white and brown goods as they call, which are smartphones, refrigerators, television sets, laptops, computers, washing machines, microwave ovens, all those consumer durables. I'm keeping cars out of it. Then the total size estimated by IBEF in 2020 was going to be about 3 lakh crores. I'm comparing 2 lakh crores and 3 lakh crores was the total size. We know that has not happened. We know even last year that growth didn't happen. Approximately that total thing would not be more than 2.5, 2.8 lakh crores, but even if I say it's 3 lakh crores, even if I say it's 3 lakh crores, then compare that to 2 lakh crores available to be spent, which would have otherwise gone into perishables, like air ticket, train ticket. You take the journey, it's gone. And I'm looking at it from the side of expenditure, not income. You talk about it. You eat the food in a restaurant, it's gone. You go to and live in a hotel or a guest house, it's gone. All that money is an amount which you couldn't spend. You can buy in buying products and consumer durables. That could be one big reason. You see the surge, there's record sales of consumer durables in this period. I don't think it has anything to do with growth in income. It is simply that people suddenly find they have bank balances which they didn't expect. And there's this flurry of sales as well from all the major retailers and of course the plan. You could say that happens every year. It's been happening for the last few years. So maybe that you could say always happens, but there has been record sales and refrigerators sales have gone up. Panasonic has I think said that refrigerators sales have gone up 71 percent or something like that. Air conditioning sales have gone up. Samsung has had huge sales this year in terms of revenue. There's been huge smartphone sales. So one can say that definitely there has been an increase in sales in revenue and some of it is pent up demand which things didn't sell. So obviously they're people buying some of it as you said at the start. But I think that there is a bulk amount lying with the middle class which they never thought, never calculated. And they would spend a certain amount of it, not entire amount of it, even if they spent 40 percent of it. Even 40 percent is somewhere close to 1.4 lakh. That's also a lot of money to be spent in these holidays. So even if the economy is doing badly, 10 percent down, middle class income is down, simple fact that they didn't go on a holiday could probably increase their potential to buy consumer variables and help these companies increase their revenue growth. Right. So what you're basically seeing is that it's good for the people who get new goods. It's good for the companies which are selling them. But on the other hand, it's a really bad deal for a lot of people who are who's like you said supply chains have been disrupted, whose day-to-day livelihoods are maybe being affected. Absolutely. In fact, if you look at it, the interesting thing is that the sales that are happening, the high record sales, many of these are not even Indian companies. You take Samsung, you take LG, you take Dell, you take HP, you take Oppo, you take any of these which have seen massive sales. Many of these people are not Indian companies. They say they produce an India, but these are essentially assembly. Most of the parts come from elsewhere. So this trends and on the other hand, when you look at domestic tourism, domestic tourism to small places which have developed entirely as tourist hubs, those entire economies depend on tourism. Those are finished. There's an ecosystem out there which has no income right now. So the net impact is actually very, very negative. Even if I look at employment, now in tourism for every lakh rupees paid spent by any company, tourist company or any small restaurant, it creates many more jobs than it would create in a highly mechanized cell phone factory or a television factory, which are heavily capital intensive. So even if their profits go up, the sales go up, the number of additional people they hire is going to be much less. They will have to hire many more people to handle their sales, their marketing, their managing the supply chains than people who actually produce. So again, put for the middle class who get hired by these companies. It's good for media because once again, these are companies which advertise a lot. So suddenly they'll see that our business isn't doing that badly. We're doing pretty well and they have no reason to, they have no way to know how they're doing well. On the other hand, all these companies which are dependent, whether it is airlines, whether it's hotels, whether it is small companies which are completely in the unorganized sector, small handicrafts, you go to a small place and you bring gifts for the entire family. They are finished. So the net impact is actually much more negative and I would say that this is one of those small things which have a huge impact in terms of increasing inequality. Right, absolutely. And also because I guess many of these sectors which are getting affected are ones which, if one year they do badly, it's very difficult for them to come back in the next year because by the time the labour force is scattered, people may have to look for new jobs, move places, many of those possibilities actually come up. Exactly. For instance, if someone's running a Dhabha or a small restaurant which 90-80 percent caters to tourists and that doesn't work, they'll have to shut down and go somewhere else and do something else. Can they completely restart next year? Maybe it'll take three years to add. Exactly. So the cycle for you to even return to where you are is going to take much longer and we know at the margins for poor people, three years is a lifetime. Exactly, right. So overall what we're seeing is that until the lockdown maybe eases and of course there are experts saying that normalcy is not really even expected until 2022 maybe because there's this whole cycle of getting a vaccine, distributing it, maybe giving two noses, waiting for a while. So what we're likely to see of course is there's also the Christmas vacation coming up which might have a very similar impact and who knows. I mean there might be a slight increase, like 20% people going might increase to 40% but not. Right. So what we're seeing is also that this is actually something that will just keep picking up as time passes and what do you call it? The inequality sort of keeps winding as well. In fact this is a problem of economy which is so heavily dependent on services. Services get disrupted terribly when you go down much, much more than manufacturing. Absolutely. Right. Thank you so much Anandji for talking to us. Thanks a lot. That's all we have time for today. We'll be back on Monday with more news from the country and the world. Until then keep watching NewsClick.