India’s foreign exchange (forex) demand is experiencing a notable shift, moving beyond traditional metropolitan hubs to include significant contributions from Tier-2 and Tier-3 cities. According to Thomas Cook India’s Forex Report 2026, these smaller urban areas account for 53% of overall forex demand, signaling a diversification in outbound travel and foreign exchange markets.
Shifting Demographics in Forex Demand
The report, compiled from Thomas Cook India’s transaction data between April 2025 and March 2026, reveals that Tier-1 cities, typically metropolitan areas, contribute 47% to the overall forex demand. This changing landscape underscores the growing economic power of Tier-2 and Tier-3 cities, which together now account for 53%. Specifically, Tier-2 cities comprise 41% of the forex market while Tier-3 cities contribute 12%. This marks a significant transition in India’s outbound travel demographics, driven largely by an expanding middle class.
Drivers of Foreign Exchange Demand
Leisure travel remains the primary driver of forex demand, constituting 57% of overall transactions. This is followed by corporate travel at 27% and student travel at 16%. With more individuals traveling for leisure, business, and education, the report indicates a diversifying market. Increased affluence and a desire for global experiences among younger consumers have likely fueled this upward trajectory. The report highlights that younger consumers aged 25-40 are responsible for 37% of forex usage, closely trailing those aged 41-60 at 36%. This demographic trend could shape travel and tourism sectors in the coming years.
The Role of Currency Preferences
When it comes to currency preferences, the United States maintains its dominance, with the US dollar making up 49% of forex transactions. This is followed by European currencies, which account for 23% of forex demand, and various Asian currencies, which make up another 11%. Notably, the Middle East, primarily the UAE dirham and Saudi riyal, contributes 9%, while Australian and New Zealand currencies account for 5%. The remaining 3% comes from the Canadian market. Understanding these currency preferences is crucial for travel agencies and forex service providers, as it can inform their strategic outreach efforts.
What This Means
The increase in forex demand from Tier-2 and Tier-3 cities signifies a broader economic shift in India, spotlighting the importance of inclusive growth. As these cities increasingly participate in foreign exchange markets, businesses would benefit from tailoring their products and services to meet the needs of a more diverse consumer base. Additionally, understanding evolving currency preferences can help businesses optimize their strategies in foreign exchange transactions, thereby enhancing customer service and satisfaction.
Frequently Asked Questions
Why is forex demand growing in Tier-2 and Tier-3 cities?
The growth in forex demand stems from an expanding middle class in these areas, increased disposable incomes, and a rise in leisure, business, and educational travel.
What percentage of forex demand comes from leisure travel?
Leisure travel accounts for 57% of the overall forex demand, making it the largest contributor in this market segment.
Which currencies are most commonly used for forex transactions in India?
The US dollar is the most commonly used currency, comprising 49% of demand, followed by the euro and British pound at 23%, and various Asian currencies making up 11%.
How has digital adoption affected forex transactions in India?
Digital adoption in forex purchases has grown significantly, with 25% of transactions now occurring through digital channels. In contrast, branch-assisted purchases still hold a dominant 75% share, but this indicates a shift toward digital-first transactions among Indian travelers.
