As the Union Budget 2026-27 approaches, India’s travel, tourism and hospitality sector is closely tracking policy signals that could shape its next phase of growth. Industry stakeholders are calling for structural reforms that go beyond short-term incentives — seeking infrastructure status, GST rationalisation, easier access to finance for MSMEs, improved connectivity, and sustained government support to position tourism as a core economic growth engine.
With domestic travel surging and international interest steadily recovering, industry leaders believe Budget 2026 presents a critical opportunity to address long-standing fiscal and regulatory gaps and strengthen India’s competitiveness as a global tourism destination.
Tourism seen as key driver of economic growth and jobs
Stakeholders across the travel, tourism and hospitality ecosystem say the sector has emerged as a major contributor to economic recovery, regional development and employment generation. They argue that structural and strategic reforms are now needed to transition tourism from being viewed largely as a service industry to becoming a key infrastructure-led growth driver for the country.
India was ranked 39th in the Travel and Tourism Development Index (TTDI) 2024, published by the World Economic Forum. Meanwhile, the tourism sector is projected to post 6–8 per cent revenue growth in FY26, according to the Indian Brand Equity Foundation (IBEF).
Government data underlines the sector’s growing economic footprint. As of June 2025, inbound tourism stood at 16.5 lakh visitors, while outbound tourism touched 84.4 lakh travellers, contributing Rs 51,532 crore in foreign exchange earnings.
As per provisional estimates of the National Accounts Statistics 2025, tourism contributed Rs 15.73 lakh crore to India’s GDP in 2023-24, accounting for 5.22 per cent of the total economy. Employment generation remains another major strength, with the Periodic Labour Force Survey (PLFS) estimating 36.90 million direct jobs and 47.72 million indirect jobs, together representing 13.34 per cent of total employment in the country.
Industry calls for GST simplification, financing support and new ownership models
Industry leaders say that while policy initiatives over the past decade have helped expand tourism infrastructure and visibility, the next stage of growth will depend on simplified taxation, better financing models, and support for evolving ownership and operating structures — particularly for MSMEs that form the backbone of the sector.
Stakeholders also highlighted the importance of rising domestic tourism demand and growing interest from international travellers, noting that tourism and hospitality have the potential to emerge as one of India’s most significant contributors to economic expansion and job creation.
Industry leaders weigh in ahead of Union Budget 2026
As expectations build ahead of Budget 2026, leaders from across the travel and tourism industry have outlined key reforms they believe could unlock sustained, long-term growth.
Managing Director & CEO, SOTC Travel Limited
Calling for comprehensive tax reforms and formal recognition of tourism as an industry, he said the upcoming Budget offers an opportunity to simplify compliance and improve liquidity across the sector.
“The Union Budget 2026 is a chance to strengthen India’s tourism foundations and accelerate growth. Our key recommendations are:
- GST Procedural Reforms: While GST 2.0 was a welcome and major reform, it had largely confined itself to rate rationalisation. It is now time to implement an option for Centralised Registration, seamless single returns and reporting across all states and procedural simplification to achieve a truly ‘Good and Simple Tax’ system.
- Flat 1% TCS: Replace the complex multi-tier structure with high tax rates (5%/20%) with a universal 1% rate. This ensures a clear audit trail of information to the tax department and enforcement authority, while avoiding needless cash/ liquidity blockage at travellers’ end.
- Industry Status: Grant ‘Industry Status’ to the tourism sector to unlock its potential and facilitate growth.”
Managing Director & CEO, Thomas Cook (India)
Emphasising tourism’s role in driving economic expansion, Mahesh Iyer highlighted the need for industry status, infrastructure investment and targeted policy support for inbound and niche tourism segments.
“As India’s Travel & Tourism sector continues to drive economic growth, the Union Budget 2026 presents a key opportunity to unlock its full potential. Granting industry status would provide access to affordable financing, lower interest rates, and institutional credit—particularly for MSMEs that form the backbone of the sector.
Investments in infrastructure across under-served regions, spiritual destinations, and Tier II/III cities -combined with a single-window clearance system for hospitality projects— will serve to accelerate development.
To strengthen inbound tourism, policy support for niche segments such as medical, sustainable, and MICE tourism with focus on incentives and skill development programmes; review of visa policies (faster e-visa processing, expanded e-visa categories, targeted visa-on-arrival schemes), and enhanced allocation for global marketing campaigns like Incredible India will be critical.
Continued government support for digital public infrastructure and potential incentives for adopting new technologies like AI and blockchain in the travel & financial services to further improve operational efficiency and elevate the traveller experience.
The industry stands ready to partner with the government to make India a truly global tourism hub.”
Co Founder, Depot48
“From the perspective of a cultural venue, hospitality is not just about food and footfall, it is about sustaining spaces where music, communities, and local economies intersect. Venues like ours invest year-round in artists, technicians, service staff, and neighbourhood ecosystems, yet policy still treats us as episodic consumption rather than long-term urban infrastructure. Budget 2026 is an opportunity to recalibrate that lens by creating regulatory and financial frameworks that recognise cultural hospitality as a stable, employment-generating sector that needs predictability more than incentives. When taxation, licensing, and access to capital are designed for continuity rather than churn, venues can invest more confidently in people, programming, and safer, more inclusive public spaces that contribute directly to tourism and city life.”
Tourism allocations in Union Budget 2025: A recap
In the Union Budget 2025-26, the government allocated Rs 2,541.06 crore to the tourism sector, focusing on infrastructure development, skill enhancement and improved travel facilitation.
A key initiative announced was the development of the top 50 tourist destinations in partnership with state governments through a “challenge mode” framework. The programme aims to upgrade tourism infrastructure, enhance connectivity and improve ease of travel. Under this model, states are required to provide land for critical infrastructure such as hotels, which are classified under the Infrastructure Harmonised Master List (HML) to attract private investment.
In addition, 40 projects across 23 states were approved for interest-free loans amounting to Rs 3,295.8 crore under the Special Assistance to States for Capital Investment, with a repayment tenure of 50 years.
The Swadesh Darshan Scheme 2.0, focused on sustainable and responsible tourism, received Rs 793.2 crore, while Rs 60 crore was earmarked for skill development in FY26 to support training programmes for youth in hospitality management and tourism services.
What the sector expects from Budget 2026
With tourism emerging as a significant contributor to GDP, employment and foreign exchange earnings, industry stakeholders believe Budget 2026 has the potential to be a turning point. Simplified GST norms, industry status, easier access to credit, targeted infrastructure investments and continued policy support for inbound and niche tourism segments are expected to dominate pre-Budget discussions.
If addressed, these measures could help cement tourism’s role as one of India’s most powerful drivers of inclusive growth, regional development and global engagement.
