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Union Budget Opens FDI and Allocation for Tourism Industry

Indian Tourism Industry has a strong relationship with the economic growth of the country. As GDP continues to increase, it enhances investment in basic infrastructure like transport system, which is a vital support to tourism industry.

Closely associated is the hotel industry in India, which has added to the growth in tourism since 2004. India has become one of the popular tourist destinations in the world. Of course there has been the government's support through its "Incredible India" campaign, which showed new light to foreign tourists. In 2005 the arrival of international tourists grew by 16% giving boost to Indian tourism.

The Union Financial Budget 2006-07 has allocated Rs.8.5 Bn for tourism sector in the tenth Five Year Plan. Having increased the service tax to 12% there is more expected revenue for the government.

With the given allocation to the Indian tourism industry in the budget, the Government appears to have realized the significance of this sector in earning valuable foreign exchange as also enabling greater employment. As new destinations develop the tourist inflow is anticipated to increase.

Several measures have been adopted in infrastructure, which will polish Indian hospitality for the foreign visitors.

The Government of India has permitted a 100% FDI in the sector. It has also necessitated certain requirements for its approval -

  • Up to four percent cost of capital of any new project will be required to pay for consultancy and technical services, including the fees for supervision, design, architects etc.
  • Up to four percent net turnover will be paid for marketing/ publicity fee and franchising, while up to ten percent of total profits is to be paid for management fee plus incentive cost.



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