<p>Domestic tourism constitutes nearly 98% of all tourist visits in India, and its strategic importance has prompted national policy efforts aimed at strengthening and expanding this segment of the tourism economy. At the same time, persistent inflation poses challenges for developing economies by eroding purchasing power, raising production costs, and potentially dampening discretionary spending such as tourism. We examine an underexplored question of whether inflation affects the elasticity of domestic tourism expenditure, focusing on how this relationship varies across income groups, using nationally representative household data from India. We utilize the spatial variation in inflation across Indian states to examine how inflation influences the elasticity of domestic tourism expenditure. Using the Heckman Selection model, the findings reveal that inflation reduces the income elasticity of domestic tourism expenditure, particularly among the bottom 75% of the income distribution. In contrast, for the top 25% of income earners, inflation has an insignificant effect on tourism decisions, suggesting that higher-income households are relatively insulated from inflationary pressures. Moreover, we find a negative association between state-level growth rate in domestic tourism visits and inflation. These results highlight the unequal impact of inflation on tourism participation and call for targeted policy interventions to sustain inclusive growth in the tourism sector. The weakened responsiveness of tourism demand to income growth due to inflation, as reflected in the reduced income elasticity at higher levels of inflation, poses challenges for policy initiatives aimed at strengthening the domestic tourism sector.</p>