The travel and tourism sector's contribution to India's GDP is expanding

22 April 2019 3 min. read

Both domestic and international travel are increasing in frequency across India, with the total number of trips being taken adding up to 2 billion per year, according to a new report from global management consultancy Bain & Company. Travel and tourism are becoming primary contributors to India's economic output.  

The findings come in the context of a rapidly expanding economy, rushing towards the position of the second largest economy worldwide by 2050. Economic growth has been contributing to an overall increase in prosperity, and the extra disposable income appears to be trickling into the travel sector.

Indians took 2 billion trips last year, and the overall spending on transportation amounted to nearly $94 billion. As a result, the size of the travel and tourism industry has been rapidly expanding over the last half a decade, making it the seventh biggest contributor to the Indian GDP currently.

Domestic and International trips by Indian travellers

In 2013, the sector contributed just under 7% of the GDP, a figure that has now grown to nearly 9.5% for last year. According to Bain & Company, the contribution is starting to resemble that in developed economies, given that the travel & tourism sector contributes 10.5% to the UK economy.

The upward trajectory is only likely to continue. Leading up to 2021, the travel & tourism sector in India is expected to grow at a compound annual growth rate of 13.5%, reaching a staggering value of $136 billion. Bain anticipates changes in the nature of travel expenditure as well.

India is currently home to 850 million online users, which is making online marketing and consumption alike of travel services a growing market. Mobile data usage is at an all time high, which is leading to “high platform penetration” and “new business models,” according to Bain.

Indian tourist spending

“New business models like the sharing economy, and standardisation and aggregation of capacity, mean that the relevance of online channels is expected to gain share. To reap the benefits of increasing online spending, companies need to facilitate new user adoption and increase penetration in the existing base across the purchase journey,” says the report.

As per the firm, the online domain is not only affecting volumes in the market, but is also having an influence on the decision-making patterns of consumers across the country. In order to understand this influence, the report breaks internet usage down into three phases, namely interest, research and experience.

Nearly 90% of consumers were influenced by online factors at any one of these three phases. Examples of such online actors include price comparison websites and travel search engines in the early phases, and booking websites and feedback portals in the latter phases of travel.

Travel and tourism as a percentage of the GDP

According to the firm, nearly 60% of Indian consumers complete bookings for their travel online while more than 50% share feedback via online portals. For businesses, the spike in online activity allows for data analytics-driven targeted marketing strategies using individual customer behaviour.

This targeted marketing is disseminated through five categories of Indian travellers, namely frequent flyers, budget business travellers, experience-oriented travellers, budget-group travellers and occasional travellers. Using this division, businesses can prioritise which phase of online activity they wish to invest in.