MSME facilitation, better infra key to unlock tourism growth: Crisil

New Delhi [India], December 30 : India's tourism sector, despite being one of the country's largest sources of livelihoods, continues to underperform in terms of economic value creation due to weak supply-side conditions, a new report released by Crisil Intelligence said on Tuesday.

"Strengthening micro, small and medium enterprises (MSMEs) capabilities, destination infrastructure and service quality is critical to converting high visitor volumes into higher incomes and stable, year-round livelihoods," it added.

The report, titled "Tourism for livelihoods: Building circuits of growth in India" said, "MSMEs dominate tourism in India, with notable presence in accommodation, transport, guiding, food services, crafts and experiences. This structure allows income to flow widely across towns, villages and heritage belts."

However, these units have limited ability to move up the value chain, restricting incomes, margins and capability to create year-round employment, it said.

In 2024, tourism was the country's largest non-farm employer engaging more than 13% of the workforce and recording 2.96 billion tourist visits. The significant scale, however, did not translate to economic value addition as the sector accounted for only ~5% of the gross domestic product, well below the global average of 10%, the report added.

This also underscores the persistent gap between visitor arrivals and value creation.

In addition to enhancing destination-level enabling conditions, targeted support for tourism MSMEs is critical for translating visitor demand into higher value outcomes.

They are responsible for service delivery across accommodation, transport, food services, guiding and local experiences, and can impact a destination's ability to offer consistent, high-quality hospitality and generate durable livelihood gains, the report said.

The report also pointed out that inbound tourism remains limited, with international visitors accounting for less than 1% of total arrivals. Visitor flows are skewed towards short-stay and diaspora travel, while higher-spending leisure tourists from advanced economies remain underrepresented. At the same time, outbound travel expenditure by Indians has risen sharply, indicating unmet demand for premium tourism experiences within the country.

According to Crisil Intelligence, improving safety, hygiene, destination management and service standards could significantly increase visitor spending and length of stay, particularly benefiting women and youth through more inclusive and stable employment opportunities.

Unlocking the sector's full potential will require coordinated supply-side interventions, including circuit-based infrastructure upgrades, sustainability-led destination management, deeper integration of MSMEs into tourism value chains, targeted skilling initiatives and better access to finance and formalisation pathways.

Such measures could help tourism evolve from a volume-driven industry into a high-value livelihood engine, the report concluded.

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