Impact of Indian Rupee on Tourism Industry

Tourism industry is one of the major sectors of the Indian economy and proportion of contribution is large for national income. The tourism industry comprises the sectors such as airlines, hotels, travel agents, foreign exchange dealer, restaurants, family entertainment venues etc. As of 2019, 4.2 crore jobs were created by tourism industry which makes 8.1 % of total employment in the country. In the Travel and Tourism Competitiveness report 2019 published by the World Economic Forum, India was ranked 34th.

Rupee depreciation impact inbound tourism positively and outbound negatively

The rupee falling sharply against major currencies will help foreigners to gain more when they visit India. So, it may impact India in a positive way. On the other hand, Rupee depreciation against US dollar adversely affect the travelers’ outflow to foreign countries. Especially Europe, America and south Asian countries. The expenses of food, hotel reservation, and airfares raised by 15% to 20% and people think twice before planning a foreign trip.

Inversely in case of Rupee appreciation, with cheap air fare rates and less expensive tour packages, Indian tourist tends to visit more places in abroad. It may so happen that a stay in Goa or Kerala may cost more than a same duration stay in Thailand or Denmark; thereby inducing people to chose international destinations over domestic one.

Reasons of Indian rupee depreciation against dollar

• Due to weakness of domestic equities, foreign institutional investor sold index futures which affected Indian rupee
• Reason of growing economic momentum Dollar strength is also increasing.
• Economy getting exposed to the risk of sudden stop and reverse capital flows due to widening of trade deficit.

Corona Virus impact on tourism industry:

Covid-19 pandemic has created one of the worst crises ever to hit the tourism industry in India impacting all its geographical segments - outbound, inbound and domestic. All vertical sectors like leisure, adventure, heritage, MICE, cruise, corporate and niche segments are adversely impacted.