Why the Tourism & Hospitality Sector Wants Infrastructure Status in Union Budget 2026

As India’s travel and tourism ecosystem continues to recover and expand, the tourism and hospitality sector is once again looking to the Union Budget 2026 for policy support. One of the most persistent demands from the industry ahead of Union Budget 2026 is the grant of infrastructure status. Stakeholders believe that it could unlock long-term growth, improve financing access, and strengthen India’s global tourism competitiveness.

Role of tourism & hospitality in India’s economy

Tourism and hospitality play a significant role in India’s economy, contributing to:

• Employment generation across skill levels
• Foreign exchange earnings through inbound tourism
• Growth of allied sectors such as aviation, transport, retail, and food services

The sector’s impact extends beyond hotels and travel services, supporting livelihoods in both urban centres and remote destinations. Given its multiplier effect, tourism is often seen as a key driver of inclusive economic growth.

Why it matters in union budget 2026

Union Budget 2026 comes at a time when the sector is seeking policy stability rather than short-term incentives. Industry stakeholders believe that recognising tourism and hospitality as infrastructure could align policy support with the sector’s long-term investment needs.

Union Budget 2025 already signalled intent by focusing on developing 50 world-class destinations with performance linked incentives homestay support and inclusion of hotels in those destinations. Stakeholders want this momentum to translate into pan India, structural support rather than project specific schemes only.​

Key reasons it matters now:

• Domestic tourism is growing fast, but capacity creation and upgradation are struggling with high capital costs and long payback periods.​
• Foreign tourist arrivals are improving but still not at full potential, partly due to infrastructure gaps, high costs and fragmented policy support.​

Sector Expectations from Budget 2026

Hotel chains, travel operators and industry associations are asking for a mix of tax and nontax measures that go beyond short-term relief. The central theme is to treat tourism and hospitality as a core economic infrastructure pillar, not just a discretionary services segment.​

Ahead of Budget 2026, broad expectations include:

• Easier access to long-term financing

• Lower cost of capital for hotel and tourism projects
• Policy measures that encourage private investment in tourism infrastructure
• Nationwide infrastructure status for hotels and tourism projects, not limited only to select destinations.​
• Rationalisation of GST on hotel tariffs and restoration of full input tax credit to improve profitability and pricing power.​
• Higher budgetary allocations for destination development, branding, connectivity and skilling.​

While fiscal constraints may limit large-scale announcements, stakeholders are watching closely for signals that reflect the government’s long-term intent toward the sector.

Sector demands ‘infrastructure status’

A key demand from industry bodies is the grant of infrastructure status to hotels and tourism projects. Pre Budget interactions highlight a consistent wish list across hotel owners, travel platforms and industry bodies.​

Main demands:

• Infrastructure status for hospitality in the harmonised master list, enabling access to longer tenure, lower cost loans and infrastructure focused financing channels.​
• Targeted tax incentives for new hotel projects, especially in Tier II/Tier III cities and heritage destinations.
• GST rate rationalization for midmarket and budget hotels and restoration of seamless input tax credit to avoid tax cascades.​

Why the sector wants infrastructure status?

This status could potentially:

• Enable access to infrastructure financing norms
• Improve lending terms and repayment tenures
• Encourage institutional and long-term investors

Granting full infrastructure status would place hospitality on par with sectors like roads, ports and power in the financial ecosystem. Industry leaders say this can materially improve project viability and speed up expansion.​

Why Infrastructure status may be delayed

Granting infrastructure status has broader fiscal and regulatory implications. Some of the reasons it may be delayed include:

• Concerns around widening the scope of infrastructure classification
• Budgetary constraints and prioritisation across sectors
• The need to balance long-term policy commitments with fiscal discipline
• Fiscal and banking sector caution: extending infra benefits to a wide and heterogeneous set of hotels and tourism projects could strain credit quality if not carefully targeted.​
• Policy preference for gradualism: the government has started by including hotels in selected destinations in the infrastructure list, but they may assess impact before scaling it up at national level.

Despite repeated demands, full scale infrastructure status for the entire tourism and hospitality sector has not been granted India wide so far.​ There is also a view that states own policies, local clearances, land rules and GST decisions must align better before a blanket status can deliver its full benefits.

As a result, any move in this direction is likely to be gradual rather than immediate.​The tourism and hospitality sector’s demand for infrastructure status reflects its capital-intensive nature and long investment cycles. While Union Budget 2026 may not deliver an immediate decision, industry stakeholders will be closely tracking policy signals that indicate the government’s long-term approach toward tourism-led growth. Even incremental steps could help improve confidence and investment sentiment in the sector.