04

India's public sector banks, which were struggling from legacy India's travel and tourism sector is experiencing robust growth, with both international and domestic tourism contributing to its expansion. The international tourist arrivals in 2024 touched a new record surpassing the pre-pandemic levels. Domestic tourist visits made an all-time record last year, driven by factors like rising disposable incomes and a growing middle class

India’s tourism sector, with rich heritage, cultural diversity and bountiful natural wonders has emerged as a travellers’ favourite and a key driver of the country’s economic growth.

With a vast area extending from the snow-covered Himalayan heights to the tropical rain forests of the south, India has a rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Forbes magazine ranked India as the seventh most beautiful country in its survey 'The 50 Most Beautiful Countries in The World' rankings. This provides a significant opportunity to fully exploit the potential of India’s tourism sector.

India being one the most popular travel destinations across the globe, the Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in the country. The sector has turned into a significant economic multiplier and is becoming increasingly important as the country strives for rapid economic growth and employment generation.

India is covered in beauty in all its nooks and corners. This nation's expansive landscape is decorated with the most diverse populations, cultures, and topographies. India also provides various geographical regions, world-class tourist attractions, and specialised travel services, including eco-tourism, heritage tourism, adventure tourism and medical tourism.

Recognizing its potential for employment-led development, the Union Budget 2025-26 allocated `2,541 crore to improve infrastructure, skill development, and travel facilitation. A major initiative includes developing 50 top tourist destinations in partnership with states, ensuring world-class facilities and connectivity.

To fulfill these commitments, 40 projects across 23 states were identified to be developed in partnership with the states. The Centre allocated interest-free loans of `3,295 crore to the states under the Special Assistance to States for Capital Investment. This funding aimed at supporting the creation of globally recognized tourist destinations by facilitating their development and strategic marketing. Additionally, the Swadesh Darshan Scheme 2.0, which focuses on sustainable and responsible tourism, would continue to expand; 34 projects have already been approved under this initiative, receiving `793 crore. To strengthen employment opportunities in the tourism sector, the government has allocated ` 60 crore for skill development in the financial year 2025-26. This funding will support intensive skill-development programs for youth, including training in hospitality management and other tourism-related services.

Growth of tourism in India

With its rich heritage, cultural diversity, and breathtaking natural beauty India has emerged as a favourite destination for both global and domestic travellers. As a key driver of economic growth, the tourism sector not only promotes development of the key areas of the sector but also improves the quality of life by creating various job opportunities and businesses across travel destinations.

The tourism sector has made remarkable recovery post pandemic, with domestic tourism leading the way, according to the World Travel & Tourism Council’s (WTTC) 2024 Economic Impact Research. Tourism in India has experienced significant growth over the past few decades. driven by government initiatives, infrastructure development, and global branding efforts. 

India's travel market is no longer a story waiting to be, it is booming now and the strong growth is expected to sustain. The market size of India’s travel and tourism industry is expected to reach $38.12 billion by 2033, according to projections by market research company IMARC Group. In 2024, this size of the travel market was $22.47 billion, the report said.

“India’s travel and tourism market is expanding due to strategic government initiatives that enhance domestic tourism and infrastructure,” the research firm said. A combination of socio-economic, technological, and policy factors are driving the growth of India’s travel story, according to IMARC.

According to a report by the Federation of Hotel and Restaurant Association of India (FHRAI), KPMG, and the PHD Chamber of Commerce and Industry (PHDCCI), the country's sustainable tourism market is projected to grow at a robust annual rate (CAGR) of 19.3% by 2032. Eco-tourism, in particular, is expected to surge at a rate of 15.7% from 2019 to 2027, reaching a market size of $ 4.55 billion.

Rising disposable income of the Indian middle class and their aspirations for exploring new places and cultures are leading to a rise in domestic tourism. Added to them, rapid growth in the aviation infrastructure including new airports, low-cost airlines and introduction of high-speed train services across the country have made travel considerably easier. Further, the rise of online travel platforms for booking travel plans, accommodations and experiences is making travel convenient.

There is also an increased awareness around niche segments such as wellness tourism, adventure travel, cultural heritage, and experiential stays, which is creating new sources of demand and lengthening the chain of tourism values.

Notably, India’s medical tourism is experiencing a remarkable growth; valued at $ 7.69 billion in 2024, it is projected to reach $ 16.21 billion by 2030. According to Medical Buyer, a leading web portal that provides various information on India’s medical sector, an estimated 7.3 million medical tourists visited India in 2024 – up by nearly 20% from 6.1 million patients in 2023. This underscores the growing global trust in India’s healthcare system. Approximately two million medical tourists visit India from across 78 countries every year.

Beyond modern medical treatments, India offers traditional therapies like Ayurveda and Yoga enhancing its appeal for holistic wellness. Kerala has emerged as a prominent destination for various medical therapies, blending modern medicine with traditional practices like Ayurveda, and attracting both domestic and international patients.

Domestic tourism, the pillar of India’s travel economy

While foreign tourist arrivals make headlines, domestic tourism continues to be the pillar of India’s travel economy. In 2024, domestic visitors’ spending hit a staggering $ 194 billion – 10% higher than that of 2023. In terms of numbers, visits by domestic travellers reached an all-time high of 3.02 trillion in 2024 – up by nearly half a trillion over the previous year. This growth is expected to rise further driven by younger demographics, increased disposable incomes, and a stronger post-pandemic preference for local exploration.      

If the number of domestic travellers set a new record in 2024, the foreign tourist arrivals too saw a sharp rise during the period. In fact, the number of foreign tourists has been increasing steadily after the fall during the pandemic years and is close to touch its pre-pandemic figures. In the last three years the foreign tourist arrivals have gone up more than six times from 1.52 million in 2021, the lowest in the new millennium, to 9.66 million last year.

However, the growth of tourism in India has largely concentrated in a few major areas. The five states which accounted for the larger part of the domestic tourist visits in 2023 were Uttar Pradesh (478.53 million), Tamil Nadu (286.01 million), Karnataka (284.12 million), Andhra Pradesh (254.71 million), and Rajasthan (179.05 million). These five states together accounted for nearly three-fifths of the total domestic tourist visits in the country. In respect of foreign tourist visits in 2023, the major five states/UTs were Maharashtra (3.39 million), Gujarat (2.81 million), West Bengal (2.71 million), Delhi (1.83 million), and Rajasthan (1.70 million). These states accounted for about 65% of the total foreign tourist visits to the country.

The top five tourist generating countries for India during 2023, were mostly the same as those during 2022 with minor changes in the rankings of some countries. Foreign tourist arrivals in India were the highest from Bangladesh with 22.3% share in total in 2023. The USA with 17.8% share was the second followed by UK (9.7%). Australia and Canada with 4.8% and 4.1% share were, respectively, the fourth and fifth biggest source of tourists in India in 2023.

Forex earnings rebounds

That India, as most other emerging economies, pays special attention to foreign tourist visits is understandable because the country earns valuable foreign exchange from them. Tourism today is not only one of the world’s leading service sectors but is also a leading foreign exchange earner across the world.

Tourism continues to play an important role as a foreign exchange earner for India too. According to the government's provisional estimates, the foreign exchange earnings from tourism in the country have increased by more than 18% in 2024 over the previous year and touched an all-time high of $ 33.19 billion. In the last eight years India has earned about $ 200 billion from foreign tourists. But for the pandemic, when the global tourism industry came to a standstill, India’s forex earnings from tourism would have been considerably more during the period.

What is significant is that despite a healthy growth in foreign tourist arrivals India has only a small representation in the international tourist map leaving a huge scope of growth in the coming years.                 India ranks 17th and has a share of about 1.5% in international tourist arrivals in the world in 2023. In terms of revenue from international tourism, India was ranked 14th with 2.1% share in 2023.

If India’s shares in international tourist arrivals and revenue look insignificant on the global landscape, what must be encouraging is that the country has been consistently improving its positions. From 36th rank in global tourism receipts in 2001, India’s rank has moved up to 14th in 2023. It’s share in global receipts has increased from 0.7% to 2.1% during the same period.

In terms of number of international tourist arrivals, India’s rank has improved from 51st to 17th during this period and its share has risen from 0.4% in 2001 to 1.5% in 2023.

Admittedly, a 2.1% share in global receipts or 1.5% share tourist arrivals are not some figures to boast of, but then the country can certainly take pride in its efforts to attract more foreign travellers over the years. After all, the country has increased its share in global receipts three times over the studied period. The share of arrivals in the global aggregate has increased nearly four times.

Economic impact of tourism in India

Tourism offers great opportunities both for the emerging economies and developing countries. It creates jobs, strengthens the local economy, contributes to local infrastructure development and helps to conserve the natural environment and cultural assets and traditions, and to reduce poverty and inequality. Tourism brings with it huge economic potential for a destination that wishes to develop their tourism industry. Employment, currency exchange, imports and taxes are just a few of the ways that tourism can bring money into a destination.

In recent years, the number of travellers has increased globally at exponential rates. There are a number of reasons for this growth including improvements in technology, increases in disposable income, the growth of budget airlines and consumer desires to travel further, to new destinations.

According to the World Travel & Tourism Council (WTTC) reports, the travel and tourism sector  contributed about 10% to global GDP in 2024, which is equivalent to $10.9 trillion. It also supports 357 million jobs, representing one in ten jobs worldwide. The sector is a major driver of economic growth, with international visitor spending increasing by almost 12% and domestic spending growing by 5.4% in 2024. 

With a steady growth in the past years, the Indian tourism and hospitality industry has emerged as one of the key drivers of economic growth among the services sector in the country. The sector has turned into a significant economic multiplier and is becoming increasingly important as the country strives for rapid economic growth and employment creation.

India realised the importance of tourism right from its independence but its development began only after the 1980s when the government took some important initiatives. The Indian government released its first tourism policy in 1982. The goal of the policy was to advance sustainable tourism as a tool for social and economic inclusion and advance India's reputation as a nation with a proud past, a thriving present, and a promising future.

Tourism is contributing significantly to India’s GDP growth, job creation and infrastructure development. With the right government support, WTTC is forecasting that the sector could grow its annual GDP contribution to Rs. 43.25 trillion by 2034, representing 7.6% of the Indian economy, and could potentially employ almost 63 million people across the country.

WTTC’s forecast is not overly optimistic. According to the report ‘Indian Tourism Data Compendium 2024’ of the ministry of tourism, the sector contributed about 5% to India’s GDP in 2024.                

Tourism is a major source of employment in India, supporting a large workforce across various skill levels. It provided direct employment to 33.42 million workers in 2024 accounting for 5.48% of the country’s total employment.

However, the sector created even more indirect jobs which have a huge multiplier impact on the economy of the tourist destinations. In 2024, the sector had 42.95 indirect jobs and together with the direct jobs accounted for 12.7% share in the country’s total employment.

Looking ahead, the outlook for growth remains positive, as tourism has fully recovered from the corona-virus pandemic and continues to exhibit higher growth rates than many services and merchandise trade. But to take the tourism’s growth trajectory to next level, the government has to address its immediate challenges including inadequate infrastructure, safety and security concerns, and environmental sustainability issues.