Tax relief, GST tweaks boost middle-class spending power, signal strong growth for tourism, hospitality: Report

Tax relief and GST tweaks are helping India’s middle class spend more on travel, dining, and leisure, signalling robust growth for tourism and hospitality. (Image: Canva)

India’s tourism and hospitality industry is set for a robust upswing, largely driven by rising disposable incomes among the country’s expanding middle class, according to a report by B&K Securities.

The report highlights that recent income tax relaxations and GST rationalisation have left a larger share of earnings in the hands of middle- and upper-middle-income households, directly boosting their spending power.

"As individuals have more money left after taxes, they are more likely to spend on non-essential categories such as travel, dining and leisure, directly benefiting sectors like hospitality and tourism," the report stated.

With more discretionary income, consumers are increasingly directing their budgets toward travel, dining, leisure, and other experiential categories. This shift is benefiting hotels, restaurants, and tourism operators across India.

The report notes that India’s middle-class population is expected to rise sharply from 432 million in FY21 to 715 million by FY31, and further to 1,015 million by FY47.

It also forecasts that India is likely to surpass the US and China in terms of middle-class population within this decade.

As affordability improves and lifestyles evolve, demand is rising across hotel services, including accommodation, dining, events, and entertainment, particularly in the upper midscale and premium segments.

The report added that the high-income population remains a key driver for luxury and upper-upscale hotels and resorts, seeking fine dining, banqueting, and recreational experiences such as golf.

The growing size of this segment underscores the increasing potential for premium hospitality offerings in India.

Domestic tourism continues to be the sector’s strongest growth engine, supported by government-led initiatives such as Dekho Apna Desh, Swadesh Darshan 2.0, Chalo India, and a refreshed Incredible India campaign, along with a more liberalised e-visa regime.

India, globally recognised for its cultural heritage, scenic beauty, and historical depth, continues to see a steady rebound in both Foreign Tourist Arrivals (FTAs) and Domestic Tourist Visits (DTVs). Despite pandemic disruptions, the sector has shown strong resilience.

The travel and tourism sector remains an important contributor to India’s economic growth, playing a vital role in GDP and employment generation.

The report concludes that rising disposable incomes, a rapidly expanding middle class, and strong government support are setting the stage for sustained growth in India’s tourism and hospitality sector.