Tourism Sector – Significance & Challenges – Explained Pointwise

The tourism sector is a broad and dynamic industry encompassing all the businesses and services that facilitate travel, leisure, and recreation. It’s one of the world’s largest economic sectors, connecting people to new places, cultures, and experiences.

What is the current status of the Tourism Sector in India?

• Before the onset of the pandemic, the contribution of the tourism sector to India’s GDP had reached ~US$ 250 billion in 2018. However, the contribution had fallen to US$ 122 billion in 2020 due to the pandemic. In 2025, tourism contributed about $231.6 billion to GDP (approx. 7%), making India the world’s 8th largest tourism economy. The sector is projected to reach 4th position globally within the next decade.

• The share of Tourism to GDP has hovered around ~5-6%.
• With post-pandemic recovery, the tourism industry is  expected to reach US$ 512 billion by 2028.
• International tourist arrivals are expected to grow from 17.7 million (2024) to 19.2 million in 2025 (8.6% increase). Tourism revenue is forecasted to rise 9.5% to $43.7 billion.
• Tourism Sector is the third-largest foreign exchange earner for the country in 2019. 
• By 2028, Indian tourism and hospitality is expected to earn US$ 50.9 billion.
• India was ranked 39th in the Travel & Tourism Competitiveness Report 2024 published by the World Economic Forum.
• The Economic Impact 2019 Report published by the World Tourism and Travel Council (WTTC) has noted that between 2014-19, India witnessed the strongest growth in the number of jobs created (6.36 million), followed by China (5.47 million) and the Philippines (2.53 million).
• The Indian tourism sector accounts for 42 million jobs, which is 8% of the total employment in the country. By 2029, it is expected to account for about 53 million jobs. The tourism sector provides diverse opportunities for jobs like in hospitality/hotels/accommodation, transportation, tour guides, travel operations etc.

What are the driving factors of the Tourism Sector in India?

The Tourism Sector in India is driven by various factors like diverse attractions, robust demand (like for medical tourism) and attractive opportunities.

What is the significance of the Tourism Sector?

1. Economic Contribution:
   • Tourism contributes approximately 7% to India’s GDP, generating foreign exchange earnings of around $43.7 billion in 2025.
   • It spurs growth in allied sectors such as hospitality, transport, handicrafts, and retail, amplifying economic impact.
2. Employment Generation:
   • The sector provides direct and indirect employment to about 42 million people, making it a vital source of livelihood, especially in rural and semi-urban areas.
   • It supports diverse skill levels—from unskilled workers to high-end professionals.
3. Cultural & Heritage Preservation:
   • Tourism incentivizes the conservation of India’s rich cultural heritage, historic monuments, art forms, and traditional crafts by generating revenue and global interest.
   • Pilgrimage and heritage tourism help sustain religious traditions and local communities.
4. Regional Development & Inclusive Growth:
   • Tourism drives infrastructure development in tier-2 and tier-3 cities, promoting balanced regional growth.
   • Community-based and rural tourism empower local populations, improve quality of life, and reduce urban migration.
5. Forex Earning: Tourism is a significant source of foreign exchange, supporting India’s balance of payments.

What are the challenges faced by the Tourism Sector in India?

1. Awareness:
   • Despite promotional campaigns by the Government, the awareness regarding India as a tourist destination remains low. Even among domestic tourists, the choice is limited to few popular destinations which remain overcrowded, while many other potential places receive low footfalls of tourists.
   • The information portals and centres are poorly managed. There is a lack of promotional campaigns in foreign countries. The absence of online branding campaigns fail to provide information to attract tourists.
2. Infrastructure and Safety:
   • Many popular destinations lack air connectivity, especially in the hilly regions.
   • There is a lack of proper hygienic facilities in many places. Lack of cleanliness is off-putting to many tourists.
   • There are safety concerns especially among foreign visitors because of few cases of harassment. Poor experience of some tourists leads to bad word-of-mouth information impacting perception of potential tourists.
3. Communication: Many tourists face communication problems while in India. This makes them dependent on tourist guides or travel operators to curate their travel in India.
4. Lack of Skilled Manpower: There is dearth of skilled manpower especially multi-lingual tour guides or hotel staff. The sector is dominated by small unorganized players who can’t spend on skilling their employees or sensitising them to cultural values of the foreign tourists. This impacts tourist experience.
5. Visa Process: The Government started the e-visa process (online) which has led to an increase in foreign tourists. However, the visa-on-arrival facility is limited to very few countries, limiting foreign tourists.
6. Currency Fluctuations: Another issue is the fluctuations in the currency exchange rates. The inability to know the value of a currency means that long-range tourism prices are especially hard to predict and the fallout from this monetary instability is already impacting multiple tourism support systems.
7. Environmental & Sustainability Concerns: Over-tourism causes environmental degradation, pollution, resource depletion, and waste management challenges at popular sites.
8. Seasonality of Tourism Demand: Demand fluctuates seasonally, leading to underutilized infrastructure and unstable income for providers during off-peak periods.

What steps have been taken for the development of the Tourism Sector in India?

1. Infrastructure:
   • The Government has been increasing investments in strengthening the country’s road and rail networks and promoting port development is a significant driver for the growth of the Tourism sector.
   • The Adarsh Station Scheme is helping modernize railway stations.
   • The Regional Connectivity Scheme – UDAN (Ude Desh ka Aam Nagrik), is helping make air travel more economical and widespread to hitherto unserved routes.
   • The Swadesh Darshan and PRASHAD schemes aim to stimulate growth in niche tourism segments such as religious, heritage, wellness, medical, adventure, MICE, wildlife etc. Under the Swadesh Darshan Scheme, the Government has launched several theme based circuits like Buddhist circuit which covers destinations associated with the life of Lord Buddha.
2. Promotional Campaign: Promotional activities such as the Incredible India 2.0 campaign focuses on niche tourism products including yoga, wellness, luxury, cuisine wildlife among others. “Find the Incredible You” Campaign focuses on the promotion of niche tourism products of the Country on digital and social media.
3. Information Helpline:
   • The government has introduced the concept of e-tourist and e-medical visas which has helped increase inbound tourists to the country.
   • Additional initiatives such as Atithi Devo Bhava, a 24×7 multi-lingual Tourist Helpline, among others have helped improve the safety and security of tourists.
   • On a pilot basis, an ‘Incredible India Helpline’ has been set up to guide the tourists.
4. Safety: The Ministry of Tourism has adopted a code of conduct for safe tourism, which contains a set of guidelines to encourage tourism activities to be undertaken with respect to basic rights like dignity, and  safety of both tourists and local residents, in particular women and children.
5. Investment: The government allows 100% Foreign Direct Investment in the Travel and Tourism sector through the automatic route to increase investments across the sector. More recently, the GST rate cut on hotel room tariffs across the board has been a positive move for the industry and is expected to boost the sector’s competitiveness globally.
6. Cleanliness and Hygiene:
   • A major cleanliness campaign has been launched under the Swachh Bharat movement for protecting and preserving the sanctity of monuments of national heritage.
   • The Ministry of Tourism has also launched an awareness campaign to ensure cleanliness of surroundings and help create a Swachh Bharat, Swachh Smarak.
7. Assistance to States: Financial assistance to states, including places of religious importance, for various tourism projects in consultation with them subject to availability of funds, inter-se priority, liquidation of pending utilisation certificates and adherence to the scheme guidelines.
8. Digital Database: In September 2021, the Government launched NIDHI 2.0 (National Integrated Database of Hospitality Industry), a scheme which will maintain a hospitality database comprising accommodation units, travel agents, tour operators and others. NIDHI 2.0 will facilitate digitalisation of the tourism sector by encouraging hotels to register themselves on the platform.
9. Skill Development:
   • The Ministry of Tourism has introduced the Incredible India Tourist Facilitator (IITF) and Incredible India Tourist Guide (IITG) Certification Programme to create an online learning platform of well-trained tourist facilitators and guides across the country.
   • The Ministry of Tourism had launched an initiative called SAATHI (System for Assessment, Awareness & Training for Hospitality Industry) by partnering with the Quality Council of India (QCI) in October 2020. The initiative was focused on effective implementation of guidelines/SOPs issued with reference to COVID-19 for safe operations of hotels, restaurants, and other units.

What should be the way forward?

1. Infrastructure Expansion & Modernisation:
   • Accelerate development of transport connectivity (roads, railways, airports) to underserved and emerging tourist destinations.
   • Upgrade accommodation, sanitation, and visitor facilities, focusing on quality and accessibility.
2. Promotional Campaigns: The government should continue to promote India’s diversity and rich heritage to re-establish its position as a tourist paradise. The promotional campaigns should target both domestic and foreign tourists. Similarly, the extent of theme-based tourist circuits can be expanded.
3. Skill development & Capacity Building:
   • The skilling initiatives should be scaled-up. The tourism sector has a potential to provide a lot of livelihood opportunities in smaller cities/towns (below tier-2 level). It can help address the issue of jobless growth.
   • Expand training programs for frontline workers, hospitality professionals, and local guides to uplift service standards.
4. Sustainable Tourism: There is a need to balance the promotion of tourism with safeguarding the physical, social, and cultural environment in the destination areas. The government should also promote green and sustainable tourism to tackle issues relating to water crisis, pollution, waste management, etc.
5. Policy & Regulatory Reforms: The Government should further reform the tourist visa norms and processes to facilitate tourism. The Government should also explore the possibility of expanding the visa-on-arrival facility.
6. Emerging Segments of Tourism: The focus should also be on supporting and promoting the emerging segments of tourism.

Conclusion:
The tourism sector is a powerful force for both economic development and cultural connection. It has huge untapped potential in India. The multiplier effect associated with the tourism sector can help raise the income levels and ensure inclusive growth. A burgeoning tourism industry can prove to be vital in ensuring India’s transition to a high income economy.