The government's several incentives to promote the tourism in India notwithstanding, the sector needs

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more impetus to fully exploit its potential, the Economic Survey said today.

Various fiscal incentives have been announced by the government for the hospitality sector such as the five-year tax holiday for two, three, and four star category hotels.

"Despite these efforts, there is a lot more to be done, given the potential of this sector," it said.

In fact at 11.5 per cent, the share of travel in India's exports of commercial services in 2008 is relatively lower than that of many other exporters of services and USA, EU and China, it said.

The Survey pointed out that the government has launched a scheme for development of nationally and internationally important destinations and circuits through mega projects.

"So far, 38 projects have been identified, out of which 23 have been sanctioned," it said.

Other initiatives include continuation of promotional efforts under the 'Incredible India' campaign, visa-on-arrival for tourists from Singapore, Finland, New Zealand, Luxembourg, Japan, Cambodia, Vietnam, Laos, Philippines, Myanmar and Indonesia.

Also, the government has put in place a multi-pronged strategy, including strengthening and expanding institutional infrastructure for training and education in order to meet the huge skill gap in the hospitality industry, it said.

The Survey said India's foreign exchange earnings from tourist arrivals grew 24.56 per cent in 2010 at $ 14,193 million, compared to $ 11,394 million in 2009.

Total foreign tourist arrivals in India increased to 5.88 million in 2010, up from 5.11 million in the year-ago period.

"During the period 2004 to 2009, the CAGRs of foreign tourist arrivals and foreign exchange earnings from tourism in rupee terms were 8.1 per cent, and 14.5 per cent, respectively," it said.

The hotel industry saw good times coming back. After falling in 2009-10, the hotel sector's sales are likely to grow in 2010-11 by 18.1 per cent due to both, higher occupancies and Average Room Rate (ARRs).

"However, fresh room additions in 2011-13 will keep the ARRs under check. Sales are expected to grow by 15.1 per cent in 2011-12," the Survey said.

As far as foreign investment is concerned, the hotel sector saw a decline in FDI in terms of number of projects in 2009 with 370 projects, compared to 553 in 2008.

Presently there are 1,593 classified hotels with a capacity of 95,087 rooms in the country.

Domestic tourist visits increased to 650 million in 2009 as compared to 562.98 million in 2008, witnessing a growth of 15.5 per cent in spite of various adverse factors during this period.