Tourism sector needs more targeted approach to realise full potential: Crisil Intelligence

New Delhi, Dec 30 (PTI) 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'.

"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 per cent of the workforce and recording 2.96 billion tourist visits. The significant scale, however, did not translate to economic value addition as the sector accounted for only about 5 per cent of the gross domestic product, well below the global average of 10 per cent. This also underscores the persistent gap between visitor arrivals and value creation, Crisil stated.

According to the report, India hosts only 1.4 per cent 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 USD 17 billion 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.

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". PTI RSN RSN ANU ANU