Indian airports have witnessed an unprecedented surge in passenger traffic in the first three months of 2024. with 97 million travellers heading overseas in the first quarter of the year. For context, that’s the number of annual passengers from India a decade ago. Despite challenges like exchange rates, climate concerns, and affordability, the desire to travel remains strong. This rapid growth underscores a broader trend: Indian travelers are significantly impacting global tourism and spending more than ever.
Record overseas spending
Indians have set a new record for overseas spending under the liberalised remittance scheme (LRS), reaching $31.7 billion in FY24. This marks a 17% increase from the $27.1 billion recorded in FY23. This rise is noteworthy given the imposition of a tax collection at source (TCS) in October 2023, which has caused a dip in the monthly average spending thereafter. Despite this, the annual data reveals a significant increase in expenditures abroad.
A substantial portion of this spending has been directed towards international travel, which has seen a 24.5% increase, amounting to $17 billion in FY24 compared to $13.6 billion the previous year. The share of travel spending under the LRS has surged to 53.6% in FY24 from 37% in FY20. This trend is a stark contrast to FY21 when international travel spending plummeted to $3.2 billion due to mobility restrictions.
Education vs. Travel
Interestingly, while travel spending has soared, the share of remittances allocated for education abroad has declined. During the pandemic in FY21, education remittances constituted 30% of the total, primarily because travel was heavily restricted. However, this share fell to 26% in FY22 as travel resumed.
In FY23, spending on education abroad decreased to $3.4 billion from $5.2 billion in FY22, representing a decline in its overall share to 12%. In FY24, spending on education remained flat at around $3.5 billion.
Moreover, for the first time, spending on maintaining relatives abroad has surpassed education expenses, amounting to $4.6 billion in FY24. This shift highlights a changing priority among Indian remitters, with more funds directed towards family and traver rather than education.
Rising incomes and market projections
The growing numbers of Indian travelers, propelled by rising incomes, are shaping a promising future for the travel sector. Projections indicate an addition of over 20 million middle-class individuals and nearly 2 million high-income earners in India over the next five years. This demographic shift is expected to further boost outbound travel and international spending.
Significantly, Indian travelers to key markets have increased remarkably compared to 2019. Visits to Japan have risen by 53%, while travel to Vietnam has skyrocketed by 248%. Even the United States, despite overall overseas arrivals still being 7% below 2019 levels due to the strong USD, has seen a 59% increase in Indian visitors. Indian outbound travel to Vietnam, the United States, and Japan has shown remarkable growth rates of 248%, 59%, and 53%, respectively, compared to 2019.
The appeal of luxe retail remains strong, with luxury fashion sales surging year-over-year in Japan (152%) and Hong Kong (208%), despite casual fashion still leading in most regions. Hong Kong’s luxury market surge can be partly attributed to its late reopening in 2023, while Japan’s boom is driven by a weak yen and strong inbound tourism.
Some of the places that are most visited and will be in vogue through 2024 are Thailand, Dubai, Azerbaijan, Malaysia, Indonesia, United Kingdom, Italy, and Spain. Many of these are familiar to Indian travellers, with some representing new frontiers, but regardless, one thing remains true; Indian travellers aren’t shy to splash the cash, and this is a trend that will likely continue to play out in the years to come.
