India’s Tourism Sector Can Add $100 Billion To GDP: Macquarie

The tourism sector in India holds immense potential, and if the government sustains its renewed focus, the sector can add $100 billion to GDP by 2024, notes research firm Macquarie.

Rakesh Arora and Arjun Bhattacharya of Macquarie in their July 27, 2015 report titled: “Eye on India” note tourism is the fourth  largest impact sector in India with a 7% contribution to Indian GDP.

Indian tourism – A high impact industry

Arora and Bhattacharya point out that over the past six years, total contribution (both direct and indirect) of tourism to GDP increased at a 4% CAGR to $128 billion. Citing recent estimates by the World Travel and Tourism Council, the analysts point out that the total contribution should rise to $230 billion by 2024, a CAGR of 7%.

The analysts note the $37 billion industry (in terms of sector GDP) is important not only due to the direct impact that tourism has on GDP growth, but also due to the indirect and induced benefits that outpace the direct benefits. The Macquarie analysts point out that according to the WTTC estimates, direct sector output set to grow by 6.4% per annum over the next 10 years, while contribution (both direct and indirect) could grow by nearly 7% to touch $230 billion by 2024.

Citing WTTC estimates, Arora and Bhattacharya point out that compared to the Education sector’s GDP impact of 4.3% and the Mining sector’s impact of 3.5%, Travel and Tourism generated a total impact of nearly 7% on India’s GDP in 2013:

Government’s initiatives to boost tourism

Touching upon central and state government’s initiatives to boost tourism, Arora and colleague point out that India took the first step in relaxing visa norms and started the Visa on Arrival program in 2010 for 11 countries.

Highlighting the positive note contained in a report by United Nations World Tourism Organization and WTTC, the analysts note historically easing of visa norms in G20 countries has resulted in 5-25% growth in foreign tourist arrivals following the relaxation in rules. They point out that the study highlights that improved visa facilitation could result in up to six million more international visitors for India, resulting in $8 million more spend and creating 1.8 million jobs over three years.

However, the analysts point out that amongst the G20 nations, India has the most stringent visa policy, with nearly 90% of international tourists arriving in the country requiring a visa compared to the G20 average of 17%:

Arora and Bhattacharya point out that last November, the government introduced e-Visa (online) facility as well as extended the Visa on Arrival program to other countries in a phased manner. The following graph sets forth the top 10 tourist nationals visiting India:

The Macquarie analysts point out that many states have developed and implemented a comprehensive tourism policy to fully tap into their tourism potential. For instance, many northern states such as Himachal Pradesh, Rajasthan, and UP have put clear policies in place, with incentives ranging from single window clearance to preferential land allotment to tax holidays and exemptions:

However, the report concludes that though there is enough happening to keep the long term interest in the Tourism market alive, current initiatives will not be enough to break out of the current range over the near term.