MSMEs Key To India’s Tourism Growth But Face Constraints, Says Crisil Intelligence

New Delhi, Dec 31 (KNN) India’s domestic tourism sector, a significant driver of livelihoods, has yet to fully realise its economic potential, according to a report by Crisil Intelligence titled ‘Tourism for Livelihoods: Building Circuits of Growth in India’.

While tourism accounted for 2.96 billion domestic visits in 2024 and employed over 13 per cent of the country’s workforce, its contribution to the gross domestic product (GDP) stood at just around 5 per cent, significantly below the global average of 10 per cent. 

The report attributes this gap to weak supply-side enabling conditions that limit the sector’s ability to convert high visitor volumes into higher incomes and stable, year-round livelihoods.

MSMEs at the Core of Tourism, Yet Constrained

Micro, small, and medium enterprises (MSMEs) dominate India’s tourism landscape, operating in accommodation, transport, guiding, food services, crafts, and local experiences. Their widespread presence ensures income reaches towns, villages, and heritage belts. 

However, limited capacity to move up the value chain restricts margins, incomes, and opportunities for sustainable employment.

Binaifer Jehani, Senior Director and Business Head, Crisil Intelligence, noted, “Tourism is already a major livelihood engine for India, but its economic potential remains underutilised. The challenge lies not in generating demand, but in strengthening the ecosystem’s capacity to translate scale into value through robust enabling conditions—destination-level infrastructure, service standards, safety perceptions and ease of travel.”

Targeted MSME Support Critical

The report highlights that targeted support for tourism MSMEs is essential to unlock higher-value outcomes. 

These enterprises play a pivotal role in service delivery and influence a destination’s ability to provide consistent, high-quality hospitality. Strengthening their access to finance, skills, and formal market linkages is crucial to enhancing service quality, retaining workers, and scaling operations sustainably.

Manasi Kulkarni, Associate Director, Crisil Intelligence, said, “The tourism sector's ability to generate higher-value livelihoods depends on how effectively MSMEs are empowered to deliver quality experiences. Without stronger access to finance, skills and formal market linkages, many MSMEs remain constrained to low-margin operations, limiting their ability to upgrade services, retain workers and scale sustainably.”

Untapped International Market and Domestic Potential

Although inbound tourism to India has grown steadily, international visitors comprise less than 1 per cent of total arrivals. Visitor flows are skewed towards short-stay and diaspora travel, while higher-spending leisure tourists fr0m advanced economies remain underrepresented. 

Meanwhile, outbound travel by Indians has risen sharply, indicating unmet domestic demand for premium and experiential tourism.

Enhancing safety, hygiene, service quality, and destination management can significantly increase visitor spending and length of stay, particularly benefiting women and youth through more stable, inclusive livelihoods.

Unlocking Tourism’s Full Potential

The report highlights that transforming tourism into a high-value livelihood sector requires comprehensive supply-side strengthening, including circuit-based infrastructure upgrades, enhanced safety and service standards, sustainability-focused destination management, deeper integration of MSMEs into tourism value chains, targeted skilling in hospitality and related services, and improved access to finance along with formalisation pathways.

(KNN Bureau)