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Investment Opportunities in Tourism Industry in India for a Foreigner

The Indian tourism Industry is seeing a significant rise in the inflow of tourists from all around the world due to its rich cultural and heritage value, variety in ecology, terrains, monuments, snow-covered mountains etc. The country is one of the most popular destinations for foreigners, which makes it one of the key drivers for the growth of the tourism industry in India. The tourism sector in India plays an important role in the overall growth of the GDP^[1]. It has the potential to bring in a large number of foreign exchange as compared to other sectors. The ease of doing business in India makes the tourism industry the best sector to invest in by foreigners. The country’s rich and exquisite history, Culture and diversity is the driving factor for attracting tourists from all over the globe, hence making it the busiest and most profitable business in India. The foreigner willing to invest in India can think of investing in the tourism, Industry in India. The present article will discuss the prospectus of investing in India’s tourism industry from a foreigner’s perspective.

Scenario of Tourism Industry in India

The Tourism industry plays an important role in the India initiative of the Make in India programme. Sit is observed that India is seeing a significant rise in t number of tourists after the ease of lockdown and removal of restrictions imposed during the Covid-19 pandemic. Since the pandemic has caused major disruptions in every sector, the tourism industry plays a significant role in raising the economy rapidly. India offers geographical geological diversity, heritage monuments and tourism products like cruises, adventure, medical, eco-tourism etc. Further, cruise tourism’s economic potential is expected to go up from 110 million dollars to 5.5 billion dollars in the coming years. India is ranked 54^th in the World Economic Forum’s Travel & Tourism Development Index (2021). BY 2030, it is expected that India will be among the top business travel market. The tourism industry is expected to reach 492.21 billion dollars in 2028. The prospective forecast is forcing the international players in the hotel chains to increase their presence in the country in order to accommodate the large number of foreign tourists, estimated up to 498,243. Henceforth, the Indian market in the tourism industry offers diversities in the sector to be invested in for the foreign entity. Moreover, looking at the growth of the tourism sector, investment in this sector could prove to be more profitable.

Advantages of Investing in the Tourism Industry 

1. Increasing Demand: The flow of tourists after the pandemic has increased, which is a driving factor for the tourism industry growth. Due to the increase in the inflow, the demand for the services is also increasing. It is expected that the travel sector is expected to grow by 6.7% to reach Rs 3.5 trillion and accounts for 9.2% of the total economy. Further, international tourist arrivals are expected to reach 30.5 million by 2028. The increasing demand is one of the factors which makes this industry more appropriate for foreigners as any entity willing to enter this sector can offer various services within the same category, just as offering travel guide service along with hotel booking. The entity can earn more profit through this arrangement by offering a single service.

2. More opportunities: The Indian government aims to increase the inflow of tourists after the covid-19 pandemic. In reference to this, they offer free loans to the MSMEs to help them cope with the crisis and revive the economy through tourism. After the pandemic, the India government is government plans to promote regional tourism by opening the door to south Asians country tourists. The initiative of the government to fund the tourism industry makes this sector more apt because a foreign entity can enter the market without any restrictions on the fund in hand. The foreign entity can open its subsidiaries in India and offer consumer services at large. Further, small foreign investors can offer their services to consumers in the sector where the big players already exist. This would make the cost competitiveness that will thrive the entity to grow in the near future.

3. Robust Policies: In order to increase tourism in India, the central government has allocated almost Rs 2400 crore in their union budget 2022-2023 to the Ministry of Tourism which is higher than the amount allocated in the year 2021-2022. Further, to harness the potential of the tourism industry, the Indian government has launched a campaign called the Swadesh Darshan Scheme, under which the tourism ministry has sanctioned 76 projects estimated at Rs 5,399.15 crore. For the development of tourism infrastructure in the country. The Indian government is further aiming to add new tourism policies which will focus on developing medical and religious tourism and adding more destinations to the existing ones. The government’s support will aid the foreign entity to freely invest in the tourism sector without any barrier or restriction in the form of regulatory requirements. The foreign entity willing to invest in the tourism sector finds a supportive hub wherein the government is aiding the entities to invest in the well-planned sector.

4. Assorted Attractions: India is a country full of rich heritage and world heritage monuments. The country offers diverse attractions ranging from attractive beaches to snow-covered Mountains. There are 27 world heritage sites, 10 big geographical zones 80 national parks and 441 sanctuaries. The diverse attractions at various places offer diversity in business services. The foreign entity willing to enter the tourism sector can offer different services at numerous places. It can offer accommodation services in different states, medical tourism in the metro cities, and eco-tourism in the coastal areas.

Products of tourism in which the foreigner can invest

The tourism products that a foreigner can offer in India are:

1. Cultural tourism: India is a culturally rich country. The foreign entity can offer to streamline online services to tourists. The foreign entity offers predetermined specified packages at a lower cost.

2. Wildlife tourism: The wildlife tourism in India is gaining pace nowadays. The development of various wildlife sanctuaries makes it for tourists to visit the same. The foreign entity can offer safari services for the dedicated wildlife sanctuary and offer other adjunct services. Since fewer dedicated wildlife tourism companies exist, the entity could maintain a stronghold in the sector if the investment is made at the right time.

3. Eco-tourism: The eco-tourism is a form of tourism which involves responsible travel with sustainable transport to natural areas conserving the environment and improving the well-being of local people. The Indian government is promoting eco-tourism with the aim of protecting the essence of nature without disturbing its natural state. In this regard, the government is promoting private players to introduce new schemes to promote eco-tourism. Looking at this, the foreign entity can grab this opportunity.

4. Medical Tourism: Medical tourism in India is a prime service in the subcategory of the tourism sector. The high-tech infrastructure and skilled medical workforce at reasonable prices have attracted many patients in India. In the past years, the country has seen an increase in the number of medical tourists. This shows that medical tourism in India holds the potential to earn a profit. The foreign entity can invest in medical tourism and offer related services, from booking their flight tickets to VISA approval.

5. Adventure Tourism:  After the covid-19 pandemic, adventure tourism has seen a sharp rise in tourists. The Adventure tourism is a type of tourism wherein tourists get engaged in the adventure activities such as trekking, climbing, rafting, scuba diving and the like. The investment opportunities in such a sector are very wide; the foreign entity can offer premium services to the tourist by introducing new activities at reasonable prices. The entity can earn a hefty amount by looking at the demand for such adventure activities.

Foreign Direct Investment (FDI) in Tourism Industry in India 

The Foreign Direct Investment in the tourism industry in India is quite big. The country has seen almost 16.60 billion dollars of FDI inflow in the hotel and tourism hospitality industry for FY 2000-2022. In contrast, the foreign direct investment in the tourism industry is estimated to be upto 8.8 billion dollars during FY 2021, showcasing a growth of 26%. Further, the government is making efforts to increase investment in the tourism sector. In pursuance of this, the government has allowed 100% FDI in the hotel and tourism sector under an automatic route. It means that foreign entities willing to invest in the hotel and tourism industry can be without any approval from the government. Moreover, 100% FDI is allowed in tourism construction projects, including developing hotels, resorts and recreational facilities.

Government Initiatives to encourage Foreign Investors

The Indian government has recognised the importance of tourism in creating foreign investors. Accordingly, the government has taken various measures in order to increase domestic and international tourism. Some of the measures involved are:

1. Swadesh Dashawn Scheme

The Ministry of Tourism launched the Swadesh Darshan scheme in 2015. The scheme aims to encourage tourism to promote, develop and capitalise on Indian tourist potential. Until March 2022, the Ministry of Tourism invested almost Rs 5,500 crore and sanctioned over 76 projects in 31 states or union territories. Furthermore, to facilitate confidence in foreign investors, the government has developed tourism-related infrastructure at more than 500 tourist destinations. In April 2022, the ministry sanctioned 10 new projects under the heritage circuit theme. The government, under the scheme, has identified Rural and coastal circuits as one of the thematic circuits for development.

2. National Integrated Database of Hospitality Industry (NIDHI)

The NIDHI is an initiative of the government towards fulfilling its commitment towards Aatmanirbhar Bharat. It uses technology to empower businesses and aims to understand the hospitality sector’s geographical; size, structure and capacity. The registration with NIDHI will help in providing electronic delivery of various services and benefits to the hospitality unit. It will also serve as a platform for the hospitality organisations to ideate, share best practices and connect with the government for ease of doing business.

3. Tax Incentives

The government has allowed an investment-linked deduction under Section 35AD of the IT Act to establish new hotels in the 2 star category and above across India. Henceforth, it implies that t 100% deduction is available with respect to the whole or any expenditure of a capital nature except land, goodwill and financial instruments.

4. State Incentives

The state incentive will include subsidised land cost, relaxation in stamp duty, the exemption in the sale or lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies or tax incentives, backward areas subsidies and special incentive packages for mega projects. The particular incentives provided for setting up projects in special areas are northeast, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.

5. Incentives from Ministry

The ministry of tourism assists in large revenue-generating projects. The ministry further supports public-private partnerships in infrastructure, such as viability gap funding.

Conclusion

The Indian tourism has huge growth potential. The country is also looking to expand the purview of the e-visa scheme towards the tourism sector, which will double the inflow of tourists in India. The presence of world-class hospitals and skilled medical professionals makes India a preferred medical destination for medical tourism. The tourism industry has the potential to expand by 2.5% on the back of higher budgetary allocation and low-cost healthcare facilities. It cannot be denied that the tourism industry is becoming a more significant economic force and has the potential to be used as a tool for development. The foreign entity can see this as an opportunity and invest in the tourism sector.

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