Tourism in India: The Tariff-proof Sector

Syllabus: GS3/Economy

Context

• In an era of global economic uncertainty and rising protectionism, like the recent U.S. hike on Indian steel and chemical products, India’s tourism sector stands out as a resilient, inclusive, and tariff-proof engine of growth.

About Tourism Sector in India

• Current Statistics (2023–24): India’s tourism sector has rebounded strongly post-pandemic, with both domestic and international travel showing impressive growth:
  • Foreign Tourist Arrivals (FTAs): 9.52 million (2023), up 47.89% from 2022;
  • Non-Resident Indian (NRI) Arrivals: 9.38 million (2023), up 18.9% from 2022;
  • Domestic Tourist Visits (DTVs): Domestic visitor spending ₹14.64 trillion (2023), up 15% from 2019;
  • Foreign Exchange Earnings (FEEs): ₹2.3 lakh crore (2023), up 31.5% from 2022;
  • GDP Contribution:  About 5% to India’s GDP (Global average of 10%); Countries like Spain and the UAE earn around 12% of GDP from tourism;
• Global Ranking: India ranks 39th in the Travel & Tourism Development Index (World Economic Forum) 2024; Strong performance in:
  • Price Competitiveness: 18th;
  • Air Transport Infrastructure: 26th;
  • Ground & Port Infrastructure: 25th;

Tourism’s Transformative Potential

• Tourism Vision @2047: 100 million foreign tourists by 2047; Focus on adventure, wellness, heritage, and niche tourism segments;
• Raising tourism’s share of GDP from 5% to 10% over the next decade could:
  • Add $516 billion annually to the economy;
  • Create 40 million new jobs;
  • Boost foreign exchange earnings to $130–140 billion;
• India currently has 1,80,000 branded hotel rooms and 1.5 million unbranded ones. Both categories need to triple to meet demand and keep prices competitive.

Why Is Tourism Tariff-Proof?

• Contrast with Tariff-Vulnerable Sectors: Key sectors like steel, chemicals, telecom equipment, and medical devices are vulnerable to tariffs that can reduce competitiveness, shrink export volumes, and lead to job losses.
  • However, tourism, by contrast, is insulated from these risks.
• No Border Duties: When a foreign tourist visits India, they spend money on hotels, food, transport, and experiences—all within India.
  • There are no import/export tariffs involved, making tourism immune to global trade wars or protectionist policies.
• Direct Foreign Exchange Earnings: In 2024, India earned $28 billion (₹2.45 lakh crore) in foreign exchange from inbound tourism.
  • It is not subject to customs duties, unlike goods exports which can be taxed or restricted by other countries.
• Economic & Strategic Value: Tourism supports millions of jobs across urban and rural India.
  • It has one of the highest economic multipliers—every rupee spent by a tourist flows through multiple sectors like transport, crafts, and hospitality.

Related Efforts & Initiatives

• Budgetary Provision: ₹2,541 crore for tourism development (FY 2025–26) for infrastructure, skill development, travel facilitation, and heritage conservation.
• Swadesh Darshan Scheme: Integrated development of theme-based tourist circuits, like Buddhist Circuit, Coastal Circuit, Desert Circuit.
  • Financial assistance to states/UTs for infrastructure and amenities.
• Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive (PRASHAD) Scheme: Development of pilgrimage sites and spiritual destinations.
  • To enhance religious tourism and visitor experience.
• E-Visa Expansion: It is available under 7 sub-categories including e-Tourist Visa; e-Medical Visa; and e-Ayush Visa.
  • It has 5-year multiple entry, 1-year multiple entry, 1-month double entry options.
• Incredible India Tourist Facilitator Certification: Online training platform to create a pool of certified tourist guides.
• Capacity Building for Service Providers (CBSP): Training programs for hospitality and tourism workers. It aims to improve service standards and employability.
• MUDRA Loans for Homestays: Financial support for individuals to start or upgrade homestay businesses.
• Performance-Linked Incentives to States: Rewards for effective destination management, cleanliness, and marketing.
• Heal in India Initiative: It promotes India as a global medical tourism hub. It includes visa facilitation, private sector collaboration, and upgraded healthcare infrastructure.

Strategic Pathways for Growth

• Develop World-Class Destinations: The Union Budget’s plan to develop 50 destinations in partnership with states is a strong start.
  • Each state needs at least one world-class hub combining infrastructure, sustainability, and branding.
• Streamline Travel Facilitation: Simplified e-visas, shorter immigration queues, and seamless arrivals are essential.
  • With Indian airlines expanding by 1,000 aircraft, connectivity can be leveraged to attract more visitors.
• Leverage Digital Storytelling: The future lies in content-led promotion. By partnering with influencers and global platforms, India can amplify its presence through AI-enabled curation and digital campaigns.
• Unlock Private Investment: Including tourism infrastructure in the Harmonised Master List can catalyse PPP investments in hotels, ropeways, wayside amenities, and convention centres.
• Strengthen Domestic Tourism: The Dekho Apna Desh campaign can be scaled into a national movement.
  • With 86% of revenues already from domestic tourism, making interstate travel more affordable will enhance cultural exchange and economic redistribution.

Source: IE