Tourism as a Driver of Economic Growth and Development

Over the past few decades, the tourism sector has emerged as one of the fastest growing in the world and has immensely contributed to the socio-economic development of many economies through employment generation, infrastructure development and export revenues.

With the contribution of the sector in world GDP estimated to be around 11.4% and 11% of total employment, tourism has emerged as a promising driver of growth and employment.

Indian Tourism Sector

The Confederation of Indian Industry (CII) plays a catalytic role in promoting Indian tourism and collaborates with the Government to promote the sector as a major mainstream industry.

In November 2017, CII brought out the report “Travel & Tourism: Undergoing Metamorphosis”, which highlights sector trends including its contribution to employment and foreign earnings.

The report also discusses the various challenges faced by the Indian sector and suggests policy recommendations.

Sector Highlights

On account of the sector’s impressive performance in 2017, India moved up 12 places to reach the 40th position among 136 nations in World Economic Forum’s Travel and Tourism Competitive Index (TTCI). With this improvement in ranking, India figured in the most improved countries list in 2017.

In 2017, the sector registered increased tourist inflows in terms of both domestic tourist visits (DTVs) and Foreign Tourist Arrivals (FTAs). DTVs grew at a Compound Annual Growth Rate (CAGR) of 13.3% while FTAs grew at a CAGR of 6.9% in 2016.

DTVs & FTAs Growth Rate (in %) 

Foreign Exchange Earnings (FEEs) also registered a substantial increase, going up to US$23.2 billion in 2016 from US$ 18.5 billion in 2013, growing at a CAGR of 7.9%.

Foreign Exchange Earnings 

Issues and Recommendations

Given that the sector faces certain challenges and the fact that India still does not figure among the top 10 tourist destinations in the world, it is imperative to bring out appropriate policy incentives and other initiatives to promote tourism.

Below are some recommendations that could address some of the current issues faced by the sector.

Infrastructure Development: Good quality and reliable infrastructure with improved regional and international connectivity is essential to make destinations more accessible to tourists.

A detailed infrastructure gap assessment should be undertaken at prominent destinations. A cabinet committee on tourism may be constituted by states that would be responsible for preparing an infrastructure plan for all major tourism spots.

Monitoring of resources designated for infrastructure, improving last mile connectivity, development of tourist facilitation centres and kiosks at airports and railway stations and improvement of tourist amenities are equally important.

Above all, tourist safety must be accorded highest priority, especially that of women. Efforts to deploy adequate number of security cameras, an effective help desk, and sensitization of local police must be undertaken to ensure safety and security of tourists.

Entertainment Facilities: Development of sightseeing sites accompanied by efforts to provide entertainment facilities could go a long way in enriching the tourists’ experience. This entails presence of authorized tour guides, children’s activities, hygienic food outlets, clean sanitation facilities etc.

Revision in GST Rates: Monument visits are not exempted from the Goods and Services Tax and taxed at the rate of 18%. An additional tax of 5% is levied in case the same is provided by a tour operator. This has discouraged monument visits as well as tourism services.

Moreover, entertainment events and amusement facilities including joy ride services such as elephant and camel rides attract 28% GST.

It is suggested that such services be taxed at no more than 12%.

Infrastructure Status to Hotel Industry: Hospitality infrastructure is critical for the growth of this sector. Moderately priced rooms should be made available to meet the ever increasing demand for tourists. 2% interest subvention should be extended to the hotel sector as it has great employment generation capacity.

Development of New Tourism Products: Products such as medical tourism, eco-tourism, adventure tourism, film tourism etc. should be promoted apart from heritage and cultural tourism which are already popular.

Also, markets with high potential must be identified and due attention should be given to developing tourism products for such markets.

Government should promote Meetings, Incentives, Conferences and Exhibitions (MICE) tourism to help create intellectual goodwill across various industries.

Skill Development: Skill development, with a focus on soft skills and linguistic capabilities complemented by courses in foreign languages and training for communication skills must be undertaken for improved service standards.

Mega Tourism Zones: A policy for creation of Mega Tourism Zones (MTZ) on the lines of Special Economic Zones (SEZ) and National Investment and Manufacturing Zones (NIMZ) can provide a much needed stimulus to the tourism sector through capital investment, infrastructure creation, employment generation and forex earnings.

Innovation of Marketing Tools: Efficient media management programmes with the help of a professional public relations agency must be undertaken to connect with tourists as well as build long-lasting brand of the market. Packaging of various tourism products on offer is also an important aspect in this context.

Equally important is the role of media like films and advertisements to promote tourist destinations globally.

Along with the various initiatives undertaken by the Indian Government to promote the tourism sector such as Swadesh Darshan Scheme and the National Mission for Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD), these will provide a much needed boost to the sector and will also have spill over effects on other service sectors like hotels and restaurants, passenger transport etc. through increased demand and employment generation.


Source: CII Report – Travel & Tourism – Undergoing Metamorphosis

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