Prime Minister Narendra Modi's appeal urging Indians to avoid overseas travel for a year to help conserve foreign exchange reserves is having immediate market impact on travel aggregator stocks. According to WealthMills Securities, the appeal is expected to have short to medium-term impact on the travel industry, with investors dumping travel aggregator stocks including EaseMyTrip, Yatra Online, and Ixigo on Monday. Speaking to NDTV Profit, Ixigo's Group CEO Aloke Bajpai said the government's appeal should be viewed in the broader context of efforts to preserve foreign exchange amid elevated crude oil prices and a weakening rupee. Indians spend an estimated $15-17 billion annually on international travel, making this a significant policy consideration for the travel industry.
While the government's appeal was made only a day earlier, Ixigo's CEO Aloke Bajpai noted it is too early to see any impact in the company's booking and search trends. According to Bajpai, the travel industry is already witnessing the impact of PM Modi's austerity call, with outbound tourism inquiries for summer falling by 10% to 15% amid inflationary pressure. As per Ravi Gosain, president of the Indian Association of Tour Operators, people may postpone overseas travel to next year, particularly affecting the peak season for outbound tourism when affluent families seek cooler locations in Europe and Australia during school holidays from April to June. Bajpai expects some travelers who may have planned discretionary overseas holidays to instead choose destinations within India.
According to Bajpai, international flights accounted for around 20% of Ixigo's flight gross transaction value (GTV) in the December quarter, translating into roughly ₹400 crore per quarter. However, this remains a relatively small component of the company's broader business, which is currently operating at an annual run rate of ₹17,000 to ₹18,000 crore. The international travel segment is facing significant headwinds as air fares have risen sharply with carriers hiking fuel surcharges, making overseas travel more expensive even before factoring in costlier hotels and transport overseas. The outbound segment is expected to reach $55.39 billion by 2034 from $18.82 billion a decade earlier, with India's outbound departures rising nearly 6% to 32.7 million in 2025. While international travel demand has been affected by geopolitical uncertainty, particularly in the Middle East since March, Bajpai noted that essential travel such as visiting relatives and attending important events abroad is likely to continue.
Recent data analysis reveals India's tourism sector has significant untapped potential, with the country contributing 0.8% to its GDP compared to major economies like China (0.3%), the USA (0.7%), and India (0.8%). However, this places India among tourism-heavy nations like the UAE (10.3%), Portugal (9.6%), and Thailand (8.5%), suggesting massive growth potential remains. According to market commentator Shankar Sharma, India's tourism sector is underpenetrated compared to its scale, with the country lacking facilities to take payments via international cards and facing infrastructure challenges including non-existent roads and terrible driving ethics. The investor emphasized that while F2 tourists make up only a small portion of the 90 lakh tourists who visit India annually, the country offers limited viable options beyond the Taj Mahal and Rajasthan Palace Hotels. Sharma noted that countries winning in tourism are also winning in soft power, employment generation, and foreign exchange inflow, highlighting India's potential to transform its tourism industry into a premium, profitable sector.
Ace investor Vijay Kedia has expressed optimism for tourism to become India's next trillion-dollar industry, calling it "an untapped goldmine" in a February 2025 tweet. Kedia has reposted this statement following PM Modi's recent appeal urging Indians to choose domestic destinations for vacations and weddings, calling them "beautiful and sacred." However, market participants have raised concerns about India's tourism infrastructure, with commentators noting that "a lot needs to be done" to transform the sector. Key challenges identified include preservation of ancient architecture, ensuring women's safety, improving cleanliness, making public transport reliable, and addressing social mindsets. The vision for India's tourism sector requires comprehensive reforms including better civic sense, corruption removal, and creating a hospitable environment for both local and foreign tourists. With spiritual tourism, wellness, culture, mountains, beaches, and heritage, the next decade could completely reshape the global tourism economy.
