Tariff-blow cushion: A tourism boom could offset India's export adversity

Mint

2 days ago

As India grapples with the adverse fallout on its economy of higher tariffs on exports to the US, steeper barriers elsewhere and global supply-chain dislocations, one cushion that is seldom padded up to absorb a foreign-exchange shock lies in plain sight: tourism.
With US tariffs expected to average close to 18%, the highest since 1934, we must brace for their impact on our export income. The US is our largest trade partner.
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According to commerce ministry data, our merchandise exports to the US stood at $86.5 billion in 2024-25, as against $77.5 billion the previous year. Service exports are unlikely to suffer, but overall forex earnings could soon take a blow, even if we somehow seal a trade deal with the US.
Yes, capital inflows are holding up for now, thanks to portfolio investors, but it is not for nothing that it's called 'hot money': easy come, easy go.
Meanwhile, net foreign direct investment dropped below $1 billion in 2024-25 as overseas investments by Indian corporates surged and foreign businesses repatriated more. It is thus imperative that we look for other avenues to earn hard currency.
India's tourism sector offers the best of both worlds: A steady source of forex earnings and, better still, mass employment in an inescapably labour-intensive sector. As estimated by the government, it created 76 million jobs over the decade since mid-2014.
Many of these roles are not at risk of an AI takeover. Domestic travel has been an expansionary force, no doubt, but on international arrivals, India lags many smaller countries on the itineraries of globe-trotters. Even within Asia, a big draw, our industry punches below the country's weight.
Ironically, our ancient civilization has so much more to offer than many rival destinations and to almost every class of tourists.
From budget visitors to uber-rich holidayers and from religious arrivals to medical guests, India has something to offer almost everyone, with its diverse climatic regions and natural beauty only part of the appeal.
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Yet, we have not been able to capitalize on these advantages for reasons that are not only preventable, but of our own making.
High hotel taxes, differential tariffs for Indian and foreign guests, harassment of women around tourist sites, poor infrastructure, untrustworthy service agents and weak law-and-order are just a few commonly cited deterrents.
As the government's India Tourism Data Compendium for 2024 notes, although international tourist arrivals rebounded to their pre-pandemic level in 2023, the country accounts for just 1.5% of total overseas arrivals and 2.1% of worldwide tourism receipts.
The result is that we rank a lowly 39th on the World Economic Forum's Travel and Tourism Development Index of 2024, having fallen 10 places since 2019.
If India is to elevate its tourist experience and overturn the image of a country where it is unsafe for women to travel alone, we need to move fast on all fronts.
Today, the tourism sector is estimated to contribute only around one-twentieth of GDP. Contrast this with Thailand's one-fifth and China's one-tenth. We already have an example within India of how tourism can transform an economy.
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Kerala, a state that has not been able to attract much corporate investment, has reaped rich dividends from this sector, which now chalks up 12% of the state's GDP.
If we move swiftly to capitalize on the advantage conferred by nature's bounty and our rich heritage, gains from tourism could outweigh any losses from an export slowdown.