As the Union Budget for 2026–27 draws closer, India’s travel, tourism and hospitality industry is sharpening its focus on policy direction rather than short-term relief. Stakeholders across the ecosystem believe the sector has reached an inflection point where deeper fiscal, regulatory and infrastructure reforms could determine whether tourism evolves into a core growth driver or remains constrained by legacy bottlenecks.

Over the past few years, domestic travel demand has expanded rapidly while inbound interest is gradually normalising. Against this backdrop, industry leaders argue that tourism must now be treated not merely as a service segment but as an infrastructure-backed economic lever with strong multiplier effects on employment, regional development and foreign exchange earnings.

The scale of the sector’s economic contribution is already visible in official data. According to provisional National Accounts Statistics 2025, tourism contributed ₹15.73 lakh crore to GDP in FY24, accounting for 5.22 percent of the economy. Employment remains one of its strongest pillars, with the Periodic Labour Force Survey estimating 36.9 million direct jobs and 47.72 million indirect jobs, together forming over 13 percent of India’s total employment base.

Foreign exchange earnings and travel flows underline this footprint further. As of June 2025, inbound tourism stood at 16.5 lakh visitors, while outbound travel reached 84.4 lakh travellers, generating ₹51,532 crore in foreign exchange earnings. India’s ranking of 39th in the World Economic Forum’s Travel and Tourism Development Index 2024 indicates steady progress but also highlights room for structural improvement in competitiveness.

Against this backdrop, industry stakeholders say the next phase of growth depends less on visibility campaigns and more on taxation reform, financing structures and administrative simplification.

A key area of concern is GST compliance complexity. Vishal Suri, Managing Director and CEO of SOTC Travel Limited, noted that while GST 2.0 focused largely on rate rationalisation, procedural burdens continue to affect liquidity and compliance for travel businesses operating across multiple states. He called for centralised registration, unified reporting and simplified return filing to make GST truly seamless for the sector.

Suri also advocated replacing the current multi-tier Tax Collected at Source structure of 5 percent and 20 percent with a flat 1 percent rate. According to him, this would maintain audit traceability for tax authorities while avoiding unnecessary cash flow blockages for travellers and tour operators. Most importantly, he emphasised the need to grant formal industry status to tourism to unlock institutional financing and improve access to credit.

Echoing similar concerns, Mahesh Iyer, Managing Director and CEO of Thomas Cook India, stressed that industry status would significantly lower borrowing costs for MSMEs that form the backbone of travel and hospitality services. He also highlighted the need for targeted infrastructure development in under-served regions, spiritual circuits and Tier II and Tier III cities, supported by a single-window clearance mechanism for hospitality projects.

Iyer further pointed to the importance of strengthening inbound tourism through policy support for niche segments such as medical tourism, MICE, and sustainable tourism. Faster e-visa processing, expanded visa categories and increased allocation for global marketing initiatives such as Incredible India were highlighted as necessary steps to improve India’s global positioning. He also noted the potential role of digital public infrastructure and emerging technologies in improving operational efficiency across the travel value chain.

These demands come in the context of measures already introduced in Union Budget 2025–26. The government had allocated ₹2,541.06 crore to tourism, with a focus on infrastructure, skill development and travel facilitation. A notable initiative was the plan to develop the top 50 tourist destinations in partnership with states through a challenge-mode framework. States were required to provide land for hotel infrastructure, classified under the Infrastructure Harmonised Master List to attract private investment.

Additionally, 40 projects across 23 states were approved for interest-free loans worth ₹3,295.8 crore under the Special Assistance to States for Capital Investment scheme, with a 50-year repayment tenure. Swadesh Darshan Scheme 2.0 received ₹793.2 crore for sustainable tourism development, while ₹60 crore was earmarked for skill development in hospitality and tourism services.

While these measures expanded infrastructure capacity, industry leaders argue that the fiscal and regulatory environment now needs to catch up with the scale of opportunity.

From a market perspective, any move to grant industry status or rationalise GST procedures could significantly improve working capital cycles for travel companies, tour operators, and hospitality players. Easier credit access would particularly benefit MSME operators in hotels, transport, tour services and destination management, many of whom remain outside formal lending channels.Economy