India’s booming outbound travel story may be heading for a temporary reset as rising currency pressures and the Prime Minister’s recent remarks encourage travellers to rethink overseas holidays. Industry experts believe the shift may not come through regulatory restrictions, but through behavioural changes already visible in the market.
Speaking to ET Now, Atul Thakkar from Anand Rathi Investment Banking said the government is unlikely to take abrupt tax-related measures such as increasing Tax Collected at Source (TCS) on overseas travel, especially after recently lowering it in the Union Budget.
“Let me tell one thing that first of all the government policy has always been standard and consistent in nature. If you look at in the budget, they had reduced the TCS. Now within few months if the government increases the TCS, it is contradictory to their stance. So, I do not think anything of those sort will come from the government on the TCS front,” said Atul Thakkar.
According to him, the larger concern for policymakers is the rapid rise in outbound tourism by Indians. He noted that in 2019, nearly 25 to 27 million Indians travelled abroad, with around half travelling for leisure. By 2025, that number has climbed to nearly 33 million, with leisure accounting for almost 55% to 60% of outbound trips.
Thakkar linked the surge in overseas travel to India’s improving income profile.
“Let us look at what is worrying the government. In 2019 we had approx 25 to 27 million Indians traveling out of India, out of which 50% were traveling primarily for leisure, that number has gone up in 2025 to 33 million people, so that is a 30% volume growth with almost 55% to 60% going for leisure. If I compare from 23 to 25, the volume growth has been at least 25%,” he said.
He added, “What I am trying to tell you over here is that this consistent travel abroad which is happening for the Indians is primarily because of high per capita income that India has started to see and we have seen global economies when they cross this $2500, $3000 per capita income benchmark, the disposable income increases and then there is a tendency to go and travel abroad.”
Shift From Europe To ASEAN?
While Thakkar does not expect a structural decline in outbound tourism, he believes travellers may temporarily pivot towards more affordable destinations because of currency volatility.
“What will we see is that people will probably if the dollar is significantly high compared to rupee and if you have a selected budget to travel, you will probably cancel your plans to go to the west whether it is Europe or North America and you will settle with some of the ASEAN nations and I think this is going to be a temporary phenomenon for the next 6 to 12 months till the time your forex and global issues are settled down,” he said.
He remains optimistic on the long-term outlook for tourism, pointing out that global travel and tourism could account for nearly 10% of world GDP over the next few years, with ASEAN economies emerging as major beneficiaries.
PM’s Comments Could Influence Traveller Behaviour
On whether the Prime Minister’s recent remarks could eventually lead to formal restrictions or regulatory clampdowns, Thakkar suggested that India has historically seen strong public responses to government appeals, even without mandatory measures.
“See, historically whatever government recommendations have come, requests have come to the people at large that itself had seen massive response from the people,” he said.
Recalling the sharp fall in Indian travel to the Maldives during diplomatic tensions, he added, “If you recollect during the tiff between India and Maldives, there was a request come up and the travel from India to Maldives had dropped by two-third.”
He also referred to travel sentiment after Operation Sindoor.
“When post operation Sindoor there was a request come up for Turkey and a couple of other nations in Eastern Europe, and there was a significant drop. These requests when they come from leaders of stature of PM, itself has its significant impact and that may itself see a tilt in the travel plans of the people,” he said.
According to Thakkar, existing bookings may remain unaffected, but fresh international bookings could slow down considerably as travellers increasingly look at domestic destinations.
“Whatever bookings are done, I do not think that will get changed, but new bookings will drop significantly and move towards the domestic,” he said.
He further pointed out that the sharp depreciation in the rupee against the US dollar has already made foreign holidays more expensive.
“And in any case with the jump that you have seen of north of 8-9% in USD to INR over the last eight-nine months, it impacts the travel budget significantly. I mean, a 10% hit on your travel budget it shakes a lot for anybody who is traveling,” he added.
AI Threat Looms Over Travel Aggregators
The discussion also turned towards the growing role of artificial intelligence in reshaping the online travel industry. Thakkar believes AI could severely disrupt low-margin travel aggregators that rely heavily on search optimisation and comparison-based models.
“So, aggregators will find it far more difficult versus some of the platform play. The aggregators who were on wafer thin margins, just surviving primarily, let us say, because of the SEO search and where they were trying to optimise on which is the best platform to buy your ticket, those will clearly be moved out because everything that was happening on meta will eventually come up on AI, on your generative AI platforms,” he said.
He believes consumers may increasingly bypass intermediaries and directly book through airline or travel partner websites using AI-powered interfaces.
“Over there you will be able to directly go either to the airlines or the travel partners' website and go by the click. So, that middle layer will definitely be having a problem,” he added.
However, Thakkar does not expect large travel platforms to aggressively cut jobs immediately. Instead, he sees gradual rationalisation where repetitive and operational tasks are automated while human roles shift towards premium customer support and personalised travel planning.
“What will happen is there will be rationalisation. So, all the mundane work, all the low-end work will be done by the AI and customisation and private trips, etc, will increase significantly high,” he said.
He also noted that memories of customer service failures during the Covid period continue to influence traveller behaviour, particularly when refunds and cancellations are involved.
“So that will play into the mind of all the travellers still for some period of time and that is where customisation will help a lot,” he added.
