Tourism Sector Needs More Targeted Approach To Realise Full Potential, Says Report

India's tourism sector requires a far more targeted, ecosystem-wide approach including strengthening micro small and medium enterprises (MSMEs) capabilities, improved destination infrastructure and service quality to convert high visitor volumes into higher incomes and realise its full potential, a Crisil Intelligence report said on Tuesday.

Despite being a large livelihood engine, the domestic tourism sector is yet to realise the full potential of its economic value due to weak supply-side enabling conditions, said the report titled 'Tourism for livelihoods: Building circuits of growth in India'.

Commenting on the economic potential of tourism in India, Binaifer Jehani, Senior Director and Business Head, Assessments, Crisil Intelligence, said, "Tourism is already a major livelihood engine for India, but its economic potential remains under-utilised. The challenge lies not in generating demand, but in strengthening the ecosystem's capacity to translate scale into value through robust enabling conditions-destination-level infrastructure, service standards, safety perceptions and ease of travel."

"Alongside cultural richness and natural diversity, India has the entrepreneurial base and domestic demand to emerge as a global tourism powerhouse. With focused reforms to strengthen supply-side foundations and unlock high-value demand, tourism can become a high-multiplier livelihood engine, creating resilient incomes for millions of households across rural and urban India," said the report.

In 2024, tourism was the country's largest non-farm employer engaging more than 13% of the workforce and recording 2.96bn tourist visits. The significant scale, however, did not translate to economic value addition as the sector accounted for only about 5% of the gross domestic product, well below the global average of 1%. This also underscores the persistent gap between visitor arrivals and value creation, Crisil stated.

According to the report, India hosts only 1.4% of total international tourists, far below its potential, and nearly one-third of these visitors are the Indian diaspora, travelling primarily to meet family and friends, rather than for leisure.

As a result, to unlock higher-value tourism, India must expand its appeal to high-spending leisure travellers from high-income countries, it said.

Retaining domestic travellers is critical, who currently spend heavily abroad, finds the report, as Indian outbound travel expenditure has risen sharply to $17bn in fiscal 2024.

With globally competitive offerings at home, such as Lakshadweep showcasing Maldives-like appeal, India can retain much of this spending, it observed.

To realise the domestic tourism sector's full potential, the report suggests targeted interventions including building circuit-based infrastructure upgrades through PPPs (public-private-partnerships); development of flagship, world-class destination hubs; improved safety, hygiene and mobility through better planning and regulation; and sustainability-led destination management to protect fragile circuits.

It also suggests deep integration of MSMEs, self-help groups (SHGs), artisans, home-stays and youth; skill development for hospitality, guiding, digital marketing, food safety and eco-operations; stronger branding and digital marketing to reposition India globally; along with targeted financing support, credit access and formalisation pathways for tourism MSMEs.