India's Tourism Sector: Impact on Gross Domestic Product

Abstract

This study presents a comprehensive analysis of the historical trajectory that India's tourism sector has taken from 1980 to 2025 and its multidimensional impact on gross domestic product, foreign exchange earnings, employment generation, and regional development. Based on longitudinal analysis over 45 years, three distinct phases are identified: a Nascent Period (1980-1991) marked by government-imposed restrictions; Liberalization and Growth (1992-2010) in the aftermath of economic reforms; and Structural Shift and Post-Pandemic Recovery (2011-2025). Tourism is found to result in substantial multiplier effects: for every rupee spent by tourists, an additional ₹1.50-₹2.00 of economic activity is created. The catastrophic 93.96% decline in foreign tourist arrivals in 2020-21 due to COVID-19 was followed by a remarkable V-shaped recovery, with foreign tourist arrivals reaching 9.82 million by 2023-24. Foreign exchange earnings since 2002 have aggregated ₹14.89 trillion, bringing much-needed balance-of-payments support. It also emerges from the analysis that the orientation of tourism in India has slowly but unmistakably become domestic, with domestic tourists accounting for 84% of visitor spending. Medium-term projections indicate 13.2 million foreign tourist arrivals by 2029-30, and tourism GDP of ₹28.9 trillion. Strategic recommendations have been made to achieve yield optimization, decentralization to Tier-2 cities, modernization of infrastructure, and integration of MSMEs to position tourism as a principal driver of India's aspiration toward a $5 trillion economy.