Can India do well in the tourism sector to increase jobs and GDP?

India’s untapped tourism potential

India’s tourism sector has long been recognized as a potential game-changer for the economy, yet its potential remains grossly untapped. Globally, tourism contributes over 10% to GDP, but India’s share remains far below, in the 3-6% range. Some of the countries like Thailand, Spain, and France, with much less potential than India, have done higher than the global average, in the 15 to 20% range.

While the country boasts diverse landscapes, religious and cultural richness, and historical treasures, its performance in the tourism sector lags far behind global benchmarks.

A fundamental reason is the fragmented approach between the Central and state governments, coupled with the absence of a business-centric mindset in conceptualizing and executing tourism projects.

This article outlines a transformative model for mega tourism projects, emphasizing collaboration, integration, and private sector participation.

Beyond improving infrastructure, attracting investments, and adding significantly to GDP, this model holds immense potential for generating employment across multiple sectors, in the immediate and long term.

Current challenges in tourism development

Despite India’s tourism potential, several challenges hinder its growth:

• Fragmented responsibilities: While central ministries manage key infrastructure like airports, railways, and national highways, execution mostly lies with the state governments.
• Bureaucratic inefficiencies: Investors face regulatory hurdles, land acquisition issues, and delays in approvals, deterring private sector participation.
• Lack of coordination: Lack of coordination between the state and the central governments results in grossly underwhelming outcomes.
• Limited vision: Governments traditionally focus on budgets and taxes. They lack the competence to run tourism as a business. Unless every tourism project operates as a profit center, bringing in adequate tourists (rich, poor, and middle class, Indian and foreign), it won’t be viable and cannot be supported by government budgets eternally.
• Inadequate marketing: India lacks aggressive global marketing strategies and campaigns to promote its tourism offerings, unlike much smaller countries such as Thailand, Vietnam, or Dubai.

Employment potential of tourism

Tourism is a labor-intensive sector with the potential to create jobs across multiple levels and industries:

1. Immediate term:
   • Construction jobs for developing hotels, resorts, and transportation infrastructure.
   • Short-term employment in ancillary industries like materials supply, transport, and logistics.
2. Medium term:
   • Jobs in the hospitality sector, including hotel staff, tour operators, and travel agencies.
   •  Employment in local businesses, such as restaurants, souvenir shops, and cultural events.
3. Long term:
   • Sustainable livelihoods for local communities through eco-tourism and heritage conservation projects.
   • Opportunities in supporting sectors like aviation, railway services, and marketing.

According to estimates, every Rs.1 crore invested in tourism generates 6 times more jobs compared to manufacturing. By fostering a robust tourism ecosystem, India can significantly boost job creation and economic growth.

A Joint Venture (JV) model for mega projects

To address existing challenges and unlock tourism’s potential, a Joint Venture (JV) Model between the central & state governments and private businesses, is proposed.

1. Collaborative Planning and Execution

A cohesive approach is essential to ensure seamless execution:

• Project identification: State and Central governments collaborate to identify high-potential tourism destinations and themes, such as religious and cultural circuits, eco-tourism hubs, and coastal tourism zones.
• Shared responsibilities: The central government focuses on large-scale infrastructure (airports, highways), while states handle localized components (state highways, utilities, land acquisition, etc).
• Pre-approved budgets: Budget allocations from both governments should be finalized before project announcements to prevent delays or disputes.

2. Business-centric approach

Governments must shift from a typical government approach to a business-oriented approach:

• Vision document: A “National Tourism Opportunities Document” can outline potential projects, inviting investors to conceptualize business models.
• Investor proposals: Indian and international investors propose project ideas based on the above and specify their expectations from the government.
• Collaborative agreements: Governments and investors negotiate responsibilities, incentives, and timelines to ensure mutual benefit.

3. Incentives and risk mitigation

To attract private investment, governments should:

• Offer tax holidays and subsidies.
• Provide Viability Gap Funding (VGF) for projects with high upfront costs.
• Ensure fast-tracked approvals and simplified regulatory processes.

4. Marketing and global positioning

• An aggressive marketing campaign under the “Incredible India 2.0” banner can position India as an attractive, unexplored global destination. Focus on India’s heritage, such as temples, yoga, ayurveda, unique festivals, etc will appeal to diverse global audiences, if promoted properly.
• Joint efforts by the Centre and states, in consultation with the private players, can focus on digital marketing, international road shows, and partnerships with travel influencers.
• The private player for each of the projects should play the most dominant part in promoting their projects.

5. Continuous engagement and oversight

An annual or ongoing process to engage stakeholders can ensure that policies evolve based on feedback. A joint oversight committee, comprising representatives from both governments and the private sector, can monitor progress, resolve issues, and maintain accountability.

Examples of global success stories

India can draw inspiration from globally successful tourism models:

• Dubai, UAE: Collaboration between the government and private players transformed Dubai into a global tourism hub, offering tax incentives and state-of-the-art infrastructure.
• Bali, Indonesia: An integrated approach to infrastructure, hospitality, and marketing made Bali a top international destination.
• Kenya: Partnerships between the government and private wildlife lodges created a seamless safari tourism experience.
• Vietnam: Simplified land acquisition policies and incentives for international hotel chains led to a tourism boom.

Examples of possible potential Indian projects are:

• A Ramayana Trail covering Ayodhya, Chitrakoot, Hampi, and even Sri Lanka
• A Luxury Heritage Circuit linking Agra, Jaipur, and Delhi, complete with high-end accommodations and immersive cultural experiences to cater to rich foreign and Indian tourists.
• Appropriate moderate and low-cost options for all the above destinations to address the needs of middle-class tourists.
• An Eco-Tourism Hub in the Western Ghats or Northeast India, integrating boutique lodges and adventure activities.
• Coastal Tourism Zone in Kerala or Goa, featuring resorts, cruises, and water sports.

Overcoming investor hesitation

Investors are likely to be wary of entering the unproven Indian tourism market. So, the following measures can be thought of to build confidence:

1. Pilot projects: Showcase success in selected regions to demonstrate viability.
2. Public-Private Partnerships (PPP): Governments co-invest in initial projects to share risks.
3. Sustainability focus: Align projects with global trends like eco-tourism to attract niche markets.
4. Incentivized frameworks: Transparent policies and financial incentives will reduce perceived risks.

Expanding the model to other sectors

While the focus of this article is on tourism, a similar model can be tried across other mega projects:

• Smart cities: Integrated urban infrastructure development.
• Renewable energy: Large-scale solar or wind farms.
• Medical tourism: Comprehensive hubs with hospitals, research centers, and hospitality.

Conclusion: A unified push for transformation

India’s tourism sector awaits transformation. By adopting a joint venture model that combines the strengths of the Central and state governments with private sector expertise, India can create a thriving tourism ecosystem.

This model not only addresses existing challenges but also unlocks the vast employment potential of tourism, paving the way for inclusive economic growth.

By aligning infrastructure, policies, and marketing, India can position itself as an important global destination, offering lessons for similar success in other sectors.

We are late by several decades. But Rome was not built in a day. This is a long-term plan.

We have succeeded in promoting yoga the world over. So, we can do this too. We can take the first important step with the right strategic direction today.

Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.

For all the latest updates, download PGurus App.

The post Can India do well in the tourism sector to increase jobs and GDP? appeared first on PGurus.