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Tourism & Hospitality Industry in India

October, 2014


Travel and tourism is the largest service industry in India. This industry provides heritage, cultural, medical, business and sports tourism. It is expected that the tourism sector’s contribution to the country’s gross domestic product (GDP) will grow at the rate of 7.8 per cent yearly in the period 2013–2023.

The Indian tourism sector has been flourishing in recent years due to the improved connectivity to and from the country. Also, better lodging facilities at the tourist destinations has been a factor which has contributed to increased Foreign Tourist Arrivals (FTA).

The policies and changes implemented by the Government of India has also been instrumental in providing the necessary boost to the Indian tourism and hospitality industry and attracting more and more foreign tourists every year.

Market Size

The tourism and hospitality sector is among the top 10 sectors in India to attract the highest foreign direct investment (FDI). In the period April 2000 – August 2014, this sector attracted around US$ 7,441 million of FDI, according to the Department of Industrial Policy and Promotion (DIPP).

A high and positive growth of 12.5 per cent was registered in foreign tourist visits (FTVs) to north-eastern states of India during 2012 from 2011, which further rose by more than 100 per cent to register a growth of 27.9 per cent during 2013 from 2012. Among these north-eastern states, Manipur recorded the highest FTVs followed by Arunachal Pradesh and then Tripura.

FTAs in India witnessed a growth of 12.9 per cent in the period July 2013 – July 2014, according to data received from Ministry of Tourism, Government of India. The FTAs during the period January–July 2014 stood at 4.11 million as compared to 3.87 million during the corresponding period of 2013, registering a growth of 4.4 per cent. USA contributed the highest number to foreign arrivals in India followed by Bangladesh and the UK.

Foreign exchange earnings (FEE) during January–July 2014 stood at US$ 11.055 billion as compared to US$ 10.85 billion during the same period last year. FEE during July, 2014 stood at Rs 10,336 crore (US$ 1.68 billion) compared to Rs 8,620 crore (US$ 1.41 billion) in July, 2013.


With the rise in the number of global tourists and realising India’s potential, many companies have invested in the tourism and hospitality sector. Some of the recent investments in this sector are as follows:

  • MakeMyTrip Ltd plans to set up a US$ 15 million innovation fund to support early-stage travel companies, with a special focus on mobile and IP-based companies. This is an inorganic growth strategy by which they are pursuing M&A opportunities in the travel technology space.
  • Peppermint Hospitality has aggregated close to 2,200 operational hotel rooms across the country with the acquisition of Bengaluru-based Boutique Hotel Management & Marketing Services Ltd, which has 60 hotels in its portfolio. Peppermint Hospitality has five operational hotels and is present in overseas markets of Florence, Italy and the UK that are operated through the management contract route.
  • IFC has invested US$ 21 million in SAMHI Hotels through compulsorily convertible debentures. This is IFC's first investment in the hotel sector in India. SAMHI has seven operational hotels in Greater Noida, Ahmedabad, Bengaluru, Hyderabad and Pune.
  • Bengaluru-based Embassy Group plans to invest Rs 1,500 crore (US$ 245.13 million) for the expansion of its hospitality business in India. The Embassy Group is also in the process of buying out the property on which the Four Seasons hotel is located, entailing an investment of Rs 600 crore (US$ 98.06 million).
  • Indian Hotels Co Ltd (IHCL) plans to add 30 hotels with 3,700 rooms and invest Rs 440 crore (US$ 71.91 million) for the next three years.

Government Initiatives

The Indian government has realised the country’s potential to rise in the tourism industry and has taken several steps to make India a global tourism hub. Some of the recent government initiatives in the sector are as follow:

  • The Government of India has launched the ‘Incredible India’ mobile application. The app will help tourists to seek information, besides enabling quality and reliable services from service providers recognised by the Government of India. This app demonstrates the Ministry of Tourism’s commitment to the use of technology for service delivery
  • The Ministry of Tourism, Government of India has launched the new tourism brand for the Union Territories of Daman and Diu and Dadra and Nagar Haveli, as well as released the Vision 2020 publication for Dadra and Nagar Haveli. This step by the government has been taken with a view to help in overall economic development of these union territories.
  • The West Bengal government has decided to set up an eco-tourism board to project the state as a major tourist destination. Work for developing a mega tourism project has already started in Jalpaiguri district and plans to develop similar projects in Sylee and Kunjanagar is under discussion.
  • The Tourism Ministry of India along with the state government of Maharashtra plan to create a cultural hub on the lines of Times Square, New York. The vision behind such a cultural hub is to provide popular entertainment as well as access to heritage and culture for the benefit of international tourists, domestic tourists and the people of Mumbai.

Road Ahead

The medical tourism market in India is projected to hit US$ 3.9 billion mark this year having grown at a compounded annual growth rate (CAGR) of 27 per cent over the last three years, according to a joint report by FICCI and KPMG. Also, inflow of medical tourists is expected to cross 320 million by 2015 compared with 85 million in 2012.

The tourism industry is also looking forward to the E-visa scheme which is expected to double the tourist inflow to India. Enforcing the electronic travel authorisation (ETA) before the next tourism season, which starts in November, will result in a clear jump of at least 15 per cent, and this is only the start, as per Mr Madhavan Menon, Managing Director, Thomas Cook India.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

References: Media Reports, Ministry of Tourism, Press Releases, Department of Industrial Policy and Promotion (DIPP)