India's tourism industry is witnessing a slower-than-expected recovery in foreign tourist arrivals compared to global trends. According to a recent report by research firm Crisil, India welcomed 4.78 million foreign tourists in the first half of 2024, reaching about 90 percent of the pre-pandemic levels seen in the first half of 2019. This rebound, though significant, trails the international recovery pace, highlighting persistent challenges that the country needs to address to regain its tourism momentum.

Key Factors Impacting Tourist Footfalls

Crisil's analysis points to multiple factors contributing to the sluggish growth in foreign tourist arrivals. A crucial element is the decreased demand from Bangladesh, driven by the current political climate in the neighbouring country. Bangladesh, which accounted for a substantial share of India's foreign tourist inflow, has seen a downturn in visitor numbers. Additionally, the ongoing suspension of direct flights from China, another significant source market, has further dampened tourist arrivals. Together, Bangladesh and China comprised 27 percent of India's foreign tourist arrivals in 2019, underscoring the substantial impact of this decline.

Rising Competition from Other Destinations

The report also highlights the increasing competition from other countries that are drawing tourists with more attractive options. Destinations such as Qatar, Dubai, Vietnam, and Sri Lanka have not only recovered to pre-Covid levels but have surpassed them. In the first half of 2024, foreign tourist arrivals rose by 47 percent in Qatar, 11 percent in Dubai, 4 percent in Vietnam, and 0.2 percent in Sri Lanka. These destinations have leveraged competitive pricing, favorable visa policies, and targeted marketing campaigns to attract tourists, positioning themselves as more affordable and accessible alternatives to India.

“Additionally, aggressive campaigns by emerging destinations such as Azerbaijan, Georgia, and Kazakhstan are competing for tourist spends,” the Crisil report noted, emphasizing the need for India to adapt its strategies to remain competitive.

Need for Visa Simplification and Enhanced Connectivity

To counter these challenges, Crisil recommends that India should focus on simplifying its visa processes, specifically by expanding its e-visa and visa-on-arrival programs, as seen in countries like Thailand and Sri Lanka. Currently, India offers e-visas to nationals of 156 countries, but there is potential to further ease and expedite the process to attract more tourists. Enhanced direct flight connectivity, especially with markets that have high tourist outflows, is also suggested to facilitate smoother travel experiences.

Leveraging social media influencers in target regions can further amplify these efforts by showcasing India’s unique cultural experiences and diverse landscapes to a global audience. These measures could be pivotal in positioning India as a more attractive destination for international travelers.

Forex Earnings Show Positive Growth

While tourist arrivals may be trailing, India’s foreign exchange earnings from tourism have shown a robust 23 percent increase in the first half of 2024 compared to the same period in 2019. This suggests that tourists are spending more during their visits, reflecting a shift in travel preferences toward higher-quality experiences.

The Crisil report attributes this rise to several factors, including a 20 percent hike in five-star hotel rates between 2019 and 2024, which points to an increasing demand for luxury accommodations. Additionally, there is a growing trend of tourists opting for premium services such as fine dining, high-end stays, and distinctive cultural experiences. This has led to an increase in foreign exchange earnings per arrival, which jumped from Rs 1.5 lakh in 2019 to Rs 2.0 lakh in the first half of 2024 — a nearly one-third increase.

Rupee Depreciation: A Double-Edged Sword

The depreciation of the Indian rupee against the US dollar, down 19.4 percent to 83 per dollar in the first half of 2024 from 69.5 in 2019, has also played a significant role in boosting foreign exchange earnings. For foreign tourists, this depreciation has made travel to India more affordable, thereby increasing their spending power during their stay. However, while this trend benefits foreign exchange earnings, it also highlights the need for a balanced approach to managing currency fluctuations and their impact on the broader economy.

Outbound Tourism Surges

In contrast to the inbound tourism scenario, India's outbound tourism is booming. There was a notable 12 percent increase in Indian national departures over pre-Covid levels in the first half of 2024, with more Indians choosing to travel abroad. This growth can be attributed to rising disposable incomes, which have made international travel more accessible, and enhanced airline connectivity and streamlined visa processes for foreign destinations.

“Indians making multiple trips abroad, supported by rising disposable income that has made international travel more affordable and enhanced airline connectivity and streamlined visa processes, have made foreign destinations more accessible,” Crisil stated.

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For India to capitalise on its tourism potential, a dual strategy is needed. On the one hand, attracting more foreign tourists through simplified visa processes, improved connectivity, and strategic marketing is crucial. On the other, continuing to develop high-quality tourism products that cater to luxury and niche segments will help sustain and increase foreign exchange earnings.

As global travel dynamics continue to evolve, India’s tourism sector must remain adaptable and proactive, leveraging its rich cultural heritage, natural beauty, and diverse experiences to draw in more visitors and boost its position in the global tourism market.