India’s travel and tourism industry is repositioning its policy priorities as demand patterns shift decisively beyond the country’s largest cities. Ahead of the Union Budget 2026–27, industry stakeholders are urging the government to align fiscal and infrastructure policy with a tourism economy that is increasingly shaped by regional and secondary destinations rather than metro-led travel alone.
Domestic travel volumes have continued to rise, with recent growth strongest on routes connecting smaller towns, pilgrimage centres and leisure destinations outside major urban hubs. This broadening of demand has expanded tourism’s geographic footprint, but it has also exposed limitations in transport access, accommodation capacity and destination readiness. Operators argue that inadequate rail, road and air connectivity risks slowing momentum just as traveller interest in non-metro experiences accelerates.
Taxation has emerged as a key friction point in sustaining this expansion. Industry representatives say the current goods and services tax framework for travel and hospitality services adds cost and complexity, particularly for smaller hotels, tour operators and transport providers operating in regional markets. Proposals being put forward include rationalising indirect taxes, granting tourism formal industry status and improving access to financing, measures intended to support investment across lodging, mobility and ancillary services in emerging destinations.
Improved connectivity is widely seen as the most effective catalyst for converting demand into durable economic activity. Gaps in last-mile infrastructure continue to limit the viability of new routes and circuits, even where traveller interest is strong. Industry groups argue that better integration of air, rail and road networks would allow regional destinations to be incorporated into mainstream itineraries, enabling operators to scale offerings beyond metro-centric models and distribute visitor flows more evenly.
These demands come as policymakers place renewed emphasis on regional development and infrastructure-led growth. While tourism is already recognised as a major employer and contributor to local economies, industry leaders caution that growth could lose traction without coordinated fiscal support and structural reform. The extent to which Budget 2026–27 addresses connectivity and tax challenges will determine how effectively the sector adapts to a travel market no longer anchored primarily in India’s biggest cities.
