Saturday, March 2, 2013

Challenges before South Korea's New President

First Published in EPW,Vol-XLVIII, No. 10, March 09, 2013

On 25 February, Park Geun-hye, the daughter of former military ruler Park Chung-hee, was sworn in as South Korea’s first woman president following her tightly contested election victory on 19 December 2012.1
In more ways than one, her election marks a historic breakthrough for a traditionally Confucian country2 whose social, political and business fields are dominated by men. Although the country has shown a remarkably high level of economic performance over the past few decades,3 its global ranking in gender parity is not much to talk about.
Women hold only 14.7% of parliamentary seats, and only 79.4% of adult women have reached a secondary or higher level of education compared to 91.7% of their male counterparts. According to the Gender Development Index of the United Nations Development Programme (2011), female participation in the labour market is only 50.1% compared to 72% for men.

Background
Park’s rise to the top post has raised hopes that it could herald a significant gender power shift and help normalise the idea of women holding positions of power, even as historical evidence in other Asian countries suggests that the ground reality is far more complex and only makes for good media headlines.
Moreover, this is not Park Geun-hye’s first stint at the presidential office Blue House. Born in 1952 as the eldest of three siblings, she moved into Blue House in early 1964, shortly after her father, Park Chung-hee, an army general, grabbed power.4
After spending her school years at Blue House, she enrolled at a local university to study electronic engineering, and, following graduation, left for France to continue her studies. She had to return abruptly in August 1974, after a gunman killed her mother in a botched assassination attempt on her father. For the next five years, she served as the acting first lady until the intelligence chief gunned down her father in 1979.
While it can be argued that she did not have control over her father’s regime, the fact remains that she was from a privileged background, with access to power. Following her father’s assassination, she spent the next 18 years out of the public eye, a period during which, as noted in her autobiography (Park Geun-hee 2007), she endured the betrayals of many of her father’s close aides and also devoted much of her time to reading books on history, philosophy, and visiting cultural heritage sites across the country in an effort to broaden her perspective.
The liberal intelligentsia however has a different story to tell (The Hankyoreh 2012). They claim that all her activities were focused on the restoration of her father’s image, by defending the military coup as a revolution to save the nation, using the bogey of a North Korean communist invasion. She published several books, and appeared regularly in the media justifying the violence committed by her father’s regime.
Throughout her father’s rule, the state’s routine invocation of the threat of communism effectively blocked any popular demand for democratic participation in the political process. The regime functioned in a manner that extended beyond the routine infliction of violence by the state on its citizens, into a realm where the state authority infiltrated every corner of civil society to both control it, and stifle its potential (Korea Democracy Foundation 2010).
Park claims that the Asian financial crisis, which dealt a devastating blow to South Korea’s pride and economy,5 proved to be a turning point in her career and she decided to rejoin public life. She was first elected to South Korea’s National Assembly in 1998, serving five terms as a representative.
Many critics argue that she used it as an opportunity to put her father back on the pedestal.6 This she has apparently succeeded in doing, by becoming the 18th president of the country, and its leader for the next five years. With her success, she has also ensured that conservatives will have held power for a decade since her predecessor Lee Myung-bak took office in 2008.
However, despite her ideological affiliation, her victory owes a lot to her embracing a liberal agenda in areas like economic democracy. During her campaign, she came out with a relatively progressive platform on issues like chaebol reforms7 and social welfare. Park said she would “tend closely to the public’s needs like a mother of ten determined not to let the children go hungry”.
Her promise was that as the first female president, she would adopt a “maternal” approach to her leadership. As a single woman who has never married, she also said she is married to her country and pledged to think only about the people’s happiness.
Park surely realises that pre-election pledges are one thing, but actual governance is a totally different cup of tea. Particularly since there are many daunting challenges that she faces – not just the economic slowdown, but more importantly North Korea’s third nuclear test in defiance of United Nations (UN) resolutions, just 13 days before she assumed office.

  Economic Challenges
Amid the continuing global financial crisis, South Korea’s economy has slowed down significantly in recent years. The government estimates that the economy grew 3.3% in 2012, but many worry that it could actually have been lower. It would follow 6.2% and 3.6% gains reported for 2010 and 2011, respectively. Things could ease to some extent this year, but risks, which have dogged the export-driven economy throughout 2012 are likely to remain in place, and the country could enter into a phase of low growth (Ministry of Strategy and Finance 2013).
The country is highly dependent on exports,8 which makes it even harder to recover. The prolonged eurozone debt problems and a possible global slowdown, as well as low domestic consumption and volatile exchange rates only accentuate the economic uncertainties. At present, there is very little that Park can do to provide an immediate boost to the economy.
An export-oriented country will always find times difficult when the world’s major importers are experiencing sluggish growth (ASAN Institute of Policy Studies 2012).
 Another problem is the indebtedness of the Korean public. Today, household debt stands at greater than 160% of income, making a reorientation of the economy towards domestic consumption very difficult. The government will therefore have to make effective management of the macroeconomy its first priority in order to successfully deal with internal and external risks, continue to help boost the economy, and pursue inclusive growth.
 The long-term challenges include a rapidly ageing population, inflexible labour market, and heavy reliance on exports. As a candidate, Park promised to work for the livelihood of individual families, making several pledges aimed at reversing the collapse of the middle class. She vowed to implement policies to improve growth, create jobs and increase social welfare spending.
 She also highlighted the importance of reforming large conglomerates that dominate the economy by promising that she will stop their unfair practices and excessive profit-seeking. While this is certainly a core issue in rebalancing the country’s wealth distribution, her party has always been strongly pro-business, and there is every likelihood that she will back away from strong reforms.
Now, with power in her hands, the focus may be on economic growth and job creation rather than on reining in the chaebols. Clearly, keeping the campaign pledges will not be easy.

North Korea Relations
This year marks the 60th anniversary of the armistice agreement that ended the combat phase of the Korean War. The North Korean nuclear negotiations have lost all momentum. The six-party talks are part of a distant past and North Korea’s third nuclear test on 12 February, conducted in defiance of international warnings, have put a sudden halt to Park’s proposal to reach out to the communist neighbour.
During her campaign, she disapproved of the hard-line policy that came to define her predecessor over the past five years and said that a friendly relationship with North Korea will be the core of her foreign and security policies. Inter-Korean relations were effectively cut off during the Lee Myung-bak administration due to a string of provocations committed by North Korea and the response by Seoul.9 Park said she would find middle ground between the approaches of South Korea’s previous presidents – Roh Moo-hyun, who gave the North unconditional aid, and Lee Myung-bak, who treated it as an adversary. Back in 2011, Park announced her vision for foreign relations, national security, and unification policy, an idea she called “diplomacy of trust and a new Korean Peninsula”.
The measures she described emphasised incremental approach over radical changes in inter-Korean relations (Park Geun-hye 2011). This was clearly done to woo large sections of the voters who disapproved of the traditionally hard-line stance of her political party towards North Korea, and it worked in the elections.
What she did not expect was that Pyongyang would go to any extent to guard its regime and increase its negotiating power, even before she could occupy her seat. Moreover, even as the UN is in the process of discussing what actions it should take to penalise the country, North Korea warned it can acquire intercontinental ballistic missiles to counter hostile forces and bolster its self-defence capabilities.
On the whole, Park has made clear on numerous occasions that she cannot allow the North to have nuclear weapons, yet stressed her commitment to engaging the communist country in a dialogue to deal with all outstanding issues. The nuclear detonation has effectively tied up her options, since South Korea is likely to join other countries in sanctions. Such a stance can cause North Korea to take a more tough approach, making it harder for her to make any conciliatory overtures.
 To make matters worse, just two days before her inauguration, the North Korean military’s representative at the truce village of Panmunjom was quoted by the official Korean Central News Agency as saying that the peninsula is facing “a grave situation where a war may break out any moment”.
The latest developments will clearly jeopardise inter-Korean relations that otherwise could have made headway under her administration. It will force her to reassess her “Korean Peninsula confidence building process”, which she has said is the cornerstone for better inter-Korean relations.
With pressure to fix the domestic economy and South Koreans’ individual welfare along with a desire to see improved relations with North Korea, Park will have to work quickly on both fronts to have a chance of succeeding. Her ability to handle relations with North Korea while working towards solutions to domestic issues will decide her legacy in the Blue House other than of being South Korea’s first woman president.
  Notes
1 Since its transformation into a republic, the Korean government, except for a brief period between August 1960 and July 1961 when a parliamentary system was in place, has maintained a presidential system. Under the Sixth Republic that began in 1987, the president is directly elected for a single five-year term by plurality vote. It was a two-way competition between Park Geun-hye and the opposition candidate Moon Jae-in. With a high voter turnout of 75.8%, Park defeated her liberal rival by 3.6 percentage points garnering 15.77 million votes.
 2 For 2,500 years Confucian teachings have influenced the thought and behaviour of people in China, Korea, Japan and Vietnam. Confucianism drew a clear distinction between the woman’s domestic sphere and the man’s public sphere, in the belief that the law of nature gave women an inferior and subordinate position in all aspects of life.
 3 Popularly known as the “Miracle on the Han River”, South Korea’s highly accelerated export-fuelled economic growth, including rapid industrialisation, technological achievement, education boom, exponential rise in living standards, rapid urbanisation and globalisation transformed it into a wealthy and highly developed country with a globally influential trillion-dollar economy.
 4 Park Chung-hee led a 1961 military coup, dislodging South Korea’s very first experiment with parliamentary democracy.
 5 For South Korea the consequences of financial and economic crisis and the intervention of the IMF in overcoming the accompanying problems were extremely painful. These problems included: a large number of bankruptcies of industrial firms and private banks; the increasing pressure on industrial firms to carry out rapid restructuring; massive dismissal of workers; currency devaluation; drastic decrease in domestic households’ demand caused by income reduction and high interest rates, etc. An average of more than 100 companies went bankrupt each day and the number of laid-off workers increased from 5,00,000 to more than 1.2 million in only a few months.
 6 Park Chung-hee won wide respect for transforming the poor war-ravaged nation into an economic juggernaut, but is also reviled in some quarters for his human rights abuses. Still, many older South Koreans remember the almost two-decade rule with fondness thanks to the economic successes of his government.
 7 Chaebol refers to a South Korean form of family business conglomerates, such as Samsung, LG, Hyundai, and SK. Since the Asian financial crisis, several attempts have been made to decentralise their management, strengthen their accounting practices, enforce anti-trust laws and impede the ability of families to retain control.
 8 The weight of exports in the South Korean economy hit an all-time high in the first nine months of last year. Exports of goods and services amounted to 57.3% of GDP, according to data by the Bank of Korea, the highest since the central bank began compiling related data in 1970.
 9 In 2010, North Korea sank a South Korea naval vessel resulting in the deaths of 46 sailors and shelled an island in the Yellow Sea that left four dead, while in 2008 a woman tourist was killed at the Mount Kumgang resort. The North also detonated its second nuclear device in May 2009 and launched a long-range rocket despite warnings issued by the international community. Seoul halted most exchanges and cooperation projects between the two sides in May 2010.

Monday, February 18, 2013

SMEs in India Deserve a Better Deal

First published in The Hindu Business Line: ____________________________________________________________________
How often have we read that small and medium enterprises are a strategic asset for the Indian economy? We are told that they contribute nearly 8 per cent of the GDP, 45 per cent of the manufactured output and 40 per cent of exports. The sector provides employment to about 60 million people through over 26 million enterprises producing over six thousand products.
 However, what is seldom mentioned is that many of them are at the mercy of the larger corporations, with no effective relief from the existing government policies. For instance, delayed payments by large companies and the resultant crippling effects have always been the bugbear of SMEs, but at the risk of losing their large orders, they do not legally complain.
 While the government efforts have always focused on ways to ease credit restrictions, strengthen training, marketing, technological support, exit policies and cluster development, very little thought has gone into the relationship between large corporations and their sub-contractors. At the risk of being accused of bringing back the “control regime,” our policymakers could well take a look at the recent initiatives in South Korea, a country that has built its strong economy on the basis of capitalistic free market principles.
 On May 22, the nation's top conglomerate, Samsung Electronics, found itself in the national anti-trust agency's crosshairs, falling afoul of the unfair practices law for its repeated cancellation of parts' orders to small contractors.
 The Korea Fair Trade Commission (KFTC) announced that it is imposing a $1.4 million fine on the company for withdrawing orders long after payments are due. It said that among 1.5 million parts orders placed by Samsung Electronics between January 2008 and November 2011, some 2 per cent or 28,000 orders were reneged on unreasonably. This left suppliers with bursting inventories, interest payments owed and disruptions to their production schedules. Although the company has strongly refuted the claims, this just goes to show that SMEs in South Korea which have been unfairly treated by their larger counterparts can always bank on help from government agencies. The same may not be true for Indian SMEs.
  RESERVED FOR SMES
 The anti-trust agency's proactive steps can be traced to the ‘shared growth' policy of the present government under President Lee Myung-bak, a former high-profile businessman. He has been pursuing co-prosperity between conglomerates and SMEs since last year as a means of addressing economic polarity.
As a response to concerns that big companies were thriving while small ones weren't under his administration, a ‘‘Presidential Commission on Shared Growth for Large and Small Companies'' was launched in December 2010, as a private institution, which is formally independent from, but actually supported by, the government.
Since its formation, the commission has announced many policy instruments to promote shared or mutual growth of large companies and SMEs through what it calls “cooperation profit distribution.” Representatives from both SMEs and large companies agreed to introduce the system and a number of proposals were then announced, including a list of business areas restricted only to SMEs.
 The commission recently announced a list of 79 products that it believes should be produced by SMEs rather than big ones, an attempt to prevent big companies from driving smaller ones out of promising markets. The conglomerates have reluctantly accepted this proposal.
  INDEX OF INCLUSION
 ‘Name and Shame' is another tool used by the Commission. It released a ‘‘shared growth index'' earlier in May, tracking how large businesses have made efforts to realise shared growth.
 Of the 56 large conglomerates subject to the index calculation, seven companies received the lowest grade of “improvement needed”, while six companies, including Samsung Electronics, POSCO, and Hyundai Motor Company, received the highest grade of “superior”. Twenty companies were ranked as “good” and 23 others were listed as “average”. The index has been calculated by combining the performance assessment of the conglomerates by KFTC, plus a personal survey of 5,200 contractors of the 56 companies.
Large companies that received the lowest mark in the assessment will not face any disadvantages. However, 26 companies with the satisfactory grade or above will be given various incentives from government agencies, including tax breaks and subsidies.
 It is the first time that the shared growth index has been calculated. Although some conglomerates may not be content with the index, it is desirable for them to acknowledge the commission's effort to improve the environment for achieving co-prosperity between conglomerates and SMEs.
 In fact, following its active involvement in the ‘‘shared growth'' agenda, many large enterprises have recently reached mutual agreements with subcontracting SMEs for fair trade and shared growth. Two prominent examples of such arrangements are Samsung and Hyundai's agreements with their respective subcontractors.
  GOVERNMENT PUSH
 Nine Samsung group affiliates, including Samsung Electronics, made cooperative agreements for shared growth with 5,200 subcontractors. The package of financial assistance amounted to $5.7 billion, among which R&D support comprised $1.7 billion.
 Samsung agreed to induce its subcontractors to make cooperative agreements with lower-level sub-subcontractors, and provide them with incentives. Similarly, six Hyundai group affiliates, including Hyundai Motors, made cooperative agreements for shared growth with roughly 1,600 subcontractors. The package of financial assistance amounted to $3.9 billion, with R&D and capacity investments making up $2.3 billion.
Hyundai promised to provide 300 R&D support manpower for its subcontractors. This is just the beginning, and many more large companies have announced similar initiatives.
With a small push from the government, the Korean companies have realised that they need to share the burden of their sub-contractors.
 That is what is lacking in India. Any number of laws can be enacted but effective implementation is crucial. It also requires a concerted effort by the government; so that the large corporations in India automatically devise their own ways to help their sub-contractors survive and share their growth.
Many companies may still be doing it on their own initiative, but if there is a government push, it will make a world of difference.

Lessons for Retail Giants Hoping to Enter India

First published in Business Standard: __________________________________________________________________
After a quiet period, intense lobbying for opening up multi-brand retail once again seems to be hotting up. On May 24, Carrefour’s India head, Jean-Noel Bironneau, met Commerce Minister Anand Sharma, and his counterparts from Wal-Mart, Tesco and Costco will no doubt follow soon.
 Ever since the government announced its decision to allow foreign direct investment (FDI) in multi-brand retail trade, and then backtracked, there have been a flurry of articles on the pros and cons of such a move.
There is no clear answer and those in favour and against FDI have expressed ample views. So, another attempt to do so would be futile, although it must be stressed that allowing FDI does not mean that the global retail giants will automatically wind up capturing the market.
 Take their experience in South Korea, home to one of Asia’s most dynamic and largest retail markets, ranking fourth behind Japan, China and India, with a relatively wealthy population. Wal-Mart and Carrefour have had to beat a retreat after struggling for years to increase market share. Tesco is the only successful foreign retailer, going from strength to strength.
 The varying success of these three retail giants in South Korea has become must-read case studies for all potential foreign investors. It also holds lessons for them in the Indian market, given the high complexities in terms of a wide geographic spread and distinct regional consumer preferences. Historically, South Korea kept its major retailing operations closed to foreign ownership. It was only in 1988 that the government began a series of three-year plans designed to improve the efficiency and productivity of the retail and distribution industry.
The first stage of this process occurred in 1989 when regulations on the establishment of foreign companies’ subsidiaries and the inflow of FDI were eased. Then, foreign retailers were permitted to establish stores at a maximum size of 1,000 sq m, as prescribed by the second stage of the open-up policy. The regulations on the number and size of retail outlets of foreign companies were further relaxed in the third stage of the programme beginning in 1993, when foreign companies were allowed to open up to 20 stores with each store not exceeding 3,000 sq m.
 It was not until 1996 that FDI in the Korean retail market was completely liberalised and foreign retailing companies began expanding there in earnest. Sensing huge opportunities, Wal-Mart, Carrefour and Tesco entered the country around the same time, but adopted different strategies.
 Wal-Mart attempted to penetrate the Korean market by building stores in distant areas where land prices were low, replicating the US strategy of smaller-city store build-up. It had only 16 stores in all of Korea with just one in the Seoul metropolitan area and could not achieve economies of scale.
The company expected the Korean consumers to drive to its stores for price shopping as American consumers do. However, this location strategy did not match well with the Korean consumers’ lifestyle and shopping habits. They prefer to buy smaller units on a more frequent basis and to have accessibility to a store within walking distance.
 As a result, Wal-Mart faced serious challenges in implementing its core competence in South Korea. Moreover, it could not enjoy its buyer power in the local vendor market and had no control over its Korean supply chain and procurement. Eventually, it packed its bags in 2006.
 Carrefour had a similar story. Despite its experience elsewhere, the company failed to localise its stores to a sufficient extent. Instead, it tried to introduce its global practices and strategies in the country. Its store layout, ambience, products and location failed to attract customers. The company wanted to attract customers by providing them high-quality products in bulk at low prices. Its stores were styled like warehouses and were simple in appearance compared to the stores of its competitors. Initially, customers were enthusiastic, but most of them were not bulk purchasers.
 Also, unlike other markets, Korean customers prefer a clean and sophisticated atmosphere along with low prices. At the time of its exit in 2006, Carrefour was the fourth-largest retailer in the country, with 32 hypermarkets. The company had invested $1.5 billion, making it the largest foreign investor in the Korean market, but that was not enough to guarantee it success.
 In contrast, Tesco had an effective “localisation” strategy for downstream activities. It entered the market by forming a joint venture with a major local partner, Samsung, leveraging its knowledge and expertise of the local market. Tesco devoted considerable attention to transferring its core capabilities to this new market, but did not attempt to iterate the British version of its retail format.
It gradually increased its stake in the company to 95 per cent, but continued to localise its 450 stores, consisting of both large hypermarkets and small Express stores. Also, of Tesco’s 27,000 staff in Korea, only four are expatriates. As a result, it became one of Tesco’s biggest success stories, generating a third of its overseas sales.
 One key factor that contributed to Tesco’s success was its ability to create “value” that is suitable for the Korean tastes and preference. While other foreign brands like Wal-Mart and Carrefour have failed, Tesco’s Korean brand, Homeplus, is moving from strength to strength, as it closes the gap with the market leader E-mart.
It also has leveraged Korean’s love for high-tech, having just launched innovative virtual stores in subway and bus stops where customers can use their smartphones to buy products that are delivered right to their homes.
 These stories contain valuable lessons for the global retail companies who now wish to expand their presence in India, whenever the law permits. Their multi-brand retail strategy has to be different from their wholesale cash and carry stores. Moreover, it is important to heavily localise operations keeping Indian tastes in mind, with or without a domestic partner. Blindly applying western business models for the Indian market will not work.

Wednesday, October 10, 2012

Outbound Tourism Policy Need of the Hour in India

It is more or less a quarterly gimmick by reporters in the Indian media who cover tourism. Since early 2011, they have been issuing reports (perhaps on ‘dry news days’) that the list of countries whose citizens will be provided Tourist Visa-on-Arrival (VOA) at international airports is being expanded. Do a Google search for ‘India visa on arrival’ and you will know what I mean. Under the policy implemented since January 2010, India currently issues VOA to 11 countries including Japan, Indonesia, the Philippines, Cambodia, Laos, Vietnam, Singapore, Myanmar, Finland, Luxembourg and New Zealand. Citizens of these countries can get a single entry visa on arrival with a maximum validity of 30 days, at Delhi, Mumbai, Chennai and Kolkata Airports. This list is sought to be expanded to include 13 countries largely from Europe, south-east Asia, even as more entry points will be included. The expansion of the list will no doubt give a major boost to the tourism industry in India, as more visitors land up on its shores. Tourism is not only a growth engine but also a big employment generator. Worldwide, the industry generates eight percent of jobs, and it is estimated that each job in the tourism industry creates two additional jobs in other sectors. As noted in the Declaration adopted by Tourism Ministers from G20 economies at the recent summit in Merida, Mexico, on May 16th, visa facilitation is central to stimulating economic growth and job creation through tourism. In particular, G20 economies could boost their international tourist numbers by an additional 122 million, generate an extra $ 206 billion in tourism exports and create over five million additional jobs by 2015 if they improve their visa processes. The Ministry of Tourism statistics show that foreign tourist arrivals in India during 2011 were 6.29 million, growing from 5.78 million during 2010. Last year, India received 12,761 tourists under the VOA scheme, the largest numbers coming from New Zealand and Japan with 2,762 and 2,344, respectively. These are still relatively low figures, if you compare the number of tourists who visited China last year (135 million). Though, it is still a good start, what is worrying is the fact that MEA is not looking at mutual reciprocity with countries in implementing the VOA policy. Rightly, the focus is to attract international tourist traffic and turn India into a major tourist destination, but regrettably, the plight of the outbound tourist is completely ignored. Today, Indian travelers and the estimated 25 million strong overseas Indian community require a processed visa from their country of residence, to visit all the major G20 economies (except Indonesia which allows for VOA). Information provided by the International Air Transport Association (IATA) shows that some 59 countries and territories provide visa-free or VOA access to holders of Indian passports.These include countries such as Burundi, Bolivia, Cape Verde, Central African Republic, Comoros, Djibouti, El Salvador, Ethiopia, Gambia, Guinea-Bissau, Guyana, Mozambique, Nauru, Sao Tome & Principe, Samoa, St Lucia, Timor Leste, Togo, Tuvalu and Kosovo, which hold little to no interest for the desi leisure traveler. It is only countries on the list like Thailand, Egypt, Cambodia, Indonesia, Hong Kong, Tanzania, Kenya, Madagascar, Maldives, Mauritius and Seychelles that may pique the interest of the Indian tourist. For that matter, the top tourist destinations for outbound Indian travelers last year were Singapore, USA, Malaysia, Thailand, China, Dubai, Hong Kong, UK, Italy, Australia, Switzerland and Canada. Since India’s tourism policy has been focusing on inbound travelers, the policy approach on outbound tourism has been relatively insufficient. This despite the fact that Indian outbound tourists topped 12.5 million, double the number of inbound tourists. The UN World Tourism Organisation predicts that the country will account for 50 million outbound tourists by 2020, while the ‘Kuoni Travel Report India 2007’ predicts that total outbound spending will cross the $28 billion mark in 2020. Pointers should be taken from the new study by London-based Centre for Economics and Business Research (CEBR), unveiled on May 10th. It highlights that outbound travel directly contributes over £22bn to the economy, representing 1.6% of UK GDP. With the inclusion of contributions made by industries supplying the sector, the total economic impact rises to over £54bn, or 3.8% of UK GDP! In addition to its economic contribution, the outbound sector makes a significant contribution to jobs. When jobs that are reliant on supplying the industry are taken into account, this reaches 5.2% of total UK employment. The report also reveals that the total tax take from the outbound sector is £6bn per year, with £1.2bn raised from indirect taxes such as Air Passenger Duty (APD). This is a significant contribution. Although there are no similar studies for India, it goes without saying that the Indian holidaymakers also spend at the local travel agent and shop for clothes, accessories, cameras, toiletries and other essentials before they embark on a trip. This consumer spending has a direct impact on the domestic economy, not to mention employment generation and taxes. Our policymakers assume that by going abroad on holiday, money is being taken out of the Indian economy. On the contrary, outbound tourists make a huge contribution to the Indian economy, both directly and indirectly. The government must recognize and support outbound travel in its current and future policies and plan strategies to deliver growth to the wider economy. The first step should be to simplify overseas travel for Indian tourists. Additionally, it should work to generate and promote demand for overseas travel in cooperation with the relevant ministries, state governments, travel agencies, airlines and overseas national tourism organizations. This segment needs to be tapped to benefit the Indian economy, and the policymakers ought not to ignore it.