Developing Tourist destinations as Investment Regions


In 2019 international visitor spending amounted to over USD 1.8 trillion (6.8% of world exports). But India was able to capture less than 1.5% of this market in terms of international tourist arrivals and tourist spending. While France, Spain, USA and China capture nearly 25% of this market. This clearly shows that despite India’s rich cultural history and biodiversity India continues to underperform in its ability to capture value from international tourism.  

Why is India unable to capture a bigger slice of tourism?

Lack of integrated development approach

We propose a  simple 5A framework to explain the factors on which tourism success hinges for any region. It depends on a country’s ability to provide world-class tourist Attractions, build Awareness for these attractions, ensure ease of Access, availability of adequate and appropriate Accommodation options and create an ecosystem of Activities to extend the time spent at the attraction. Given India’s rich cultural heritage and natural diversity, we already have world-class tourist attractions. But even in cases where India has world-class tourism destinations and an incidental culmination of the other factors (Taj Mahal, Statue of Unity, Bodh Gaya etc), we have been unable to maximize both the number of tourists as well as the amount spent by tourists at the destination. For example, most foreign tourists that travel to India visit Agra. But given the limited diversity in experiences offered, most tourists spend less than two days in the city with the majority of tourists choosing to do a day trip from Delhi. This significantly affects the value captured per tourist by the city. This is because the idea of maximizing value captured per tourist is not factored into the process of planning. This involves making it easy to invest in immersive museums, light shows, night walks, food tours etc. This will not only increase the value captured by accommodation units but also increase expenditure on entertainment, restaurants, transport, gifts and souvenirs etc. Hence, while the tourism ministry has done a good job with awareness, we have not been able to capture a bigger slice of the world tourism market given our inability to create world-class experiences by combining all five factors. 

The Program Management Problem

A need for integrated development of tourist destinations is well-established. The National Action Plan for tourism 1992 first talked about the creation of Special Tourism Areas and every policy since has echoed this idea. This means the problem with tourism development is more structural than conceptual. For example, improving the ease of access to any tourist destination requires investment in Airports, Roads and Railways. This means a tourism development plan should have buy-in and resource allocation from The Ministry of Road Transport and Highway, Ministry of Civil Aviation and Ministry of Railways. Similarly, depending on where we intend to create additional accommodation infrastructure, we need support from the Ministry of Housing and Urban Affairs, Ministry of Rural Development, Ministry of Environment, Forest and Climate Change among others. Hence any meaningful attempt at the creation of a successful tourist circuit depends on our ability to successfully drive inter-ministerial coordination. This has been a key bottleneck in the past. And given its limited powers and resources for integrated development, the Ministry of Tourism has directed its efforts towards destination development (attraction) and marketing (awareness). 

How is India trying to solve these structural challenges?

The “Swadesh Darshan Scheme 2.0” which is the latest rendition of a National Tourism Cluster development scheme launched in 2022 tries to solve these dual challenges of integrated planning and inter-ministerial coordination in the following way. The integrated planning and development are to be done by identifying a government implementation agency supported by Project Development and Management Consultants. While the project management challenges are to be solved by creating an inter-departmental National Steering Committee chaired by the tourism minister and a State Steering Committee chaired by the Chief Secretaries of their respective states. The idea here is to onboard professionals who help with the planning and assign senior officials who will debottleneck the challenges of the past. While this approach holds promise, its effectiveness hinges on the state’s ability to plan for and execute the development of these clusters. In particular, having an inter-ministry coordination mechanism like the national steering committee is important, but it must include someone with inter-ministry authority or it risks being a toothless committee. The state-level committees are chaired by the Chief Secretary and avoid this issue. 

Planning tourist destinations as Investment Regions 

Achieving integrated development of tourist destinations without running into inter-ministerial bottlenecks is only possible by planning tourist destinations as Investment Regions. This can be achieved by declaring high-potential tourism regions (for example Bodh Gaya in Bihar, Hampi in Karnataka, and Ellore in Maharashtra) as Special Tourism Investment Regions (SITR) where all the powers required for integrated planning, development and success of the region are transferred to a tourism development authority. For example, to improve access and create high-quality accommodation infrastructure the development body will need powers to acquire land, approve plans for use of land, grant permission and approval for infrastructure projects etc. Similarly, different aspects of tourism development will require different powers to be transferred to a regional development body for the specified region. All of this can easily be done by any state by passing a Special Tourism Investment Region Act which can outline these powers in detail. This has already been done for the development of Industrial areas in states like Gujarat and Rajasthan where the state has their Special Investment Regions (SIR) Act that provides for the establishment, operation, regulation and management of Industrial Areas. In such states instead of creating a new Act, we may create SITRs within the provisions of the existing SIR Act. By creating SITRs and legally empowering tourism development authorities we can truly solve challenges around the integrated development of tourist regions and interministerial coordination. This can help us unlock the true potential of tourism for India. 

Structural challenges of the past have led to India’s underperforming in tourism. Solving this requires us to plan tourist destinations as investment regions and work with private Hoteliers, Travel Agencies, OTAs etc. Also, rather than limiting our efforts to attracting a higher number of tourists, we need targeted interventions that maximize the value captured from each tourist. Unless we can do this, tourism will only add to the carbon footprint without making a meaningful contribution to employment or GDP.

Leave a Reply

Your email address will not be published. Required fields are marked *