Indian tour operators say there has been a sharp drop in tourist traffic to Australia’s holiday and business sectors in the last seven months.

“The perception that Australia is unsafe continues amongst Indians who mostly holiday with their families, despite the assurance given by the Australian government,” says Pradip Lulla, president of the Travel Agents Federation of India (TAFI).

The attacks on Indian students last year escalated into a diplomatic issue between the two countries and hurt Australia’s lucrative foreign student market.

Indian media labelled the attacks as racist, but police and the Australian government said it was the work of criminals.

Although Australia condemned the attacks and assured the Indian government the assaults were being treated with utmost seriousness, travel warnings and negative media reports in India forced holidaymakers to rethink their Australia plans.

Lulla said there had been a drop of 25 to 30 percent in Indian tourist numbers for Australia’s leisure and business sectors from October last year to April.

“I don’t see a pickup if negative media reports and travel advisories continue,” he says.

Data from the Australian High Commission website showed that though there was an 8 percent rise in visitor arrivals from India in 2009, the holiday and business markets had dropped 10 percent and 15 percent respectively.

“The government should give some assurance that tourists will be safe there at all times of the day,” said Anil Punjabi, director of the Kolkata-based Ar-es Travels Pvt Ltd.

Tourist bookings from eastern India had dropped 10-12 percent over the past couple of months, he added.

Australia is a major destination for Indian students studying abroad, but the international student sector has been forecast to see a 20 percent drop in Indian students in 2010, according to a study by the Tourism Forecasting Committee.

The number of Indian students wanting to study in Australia plummeted by 46 percent between July and October last year, according to Australian immigration department figures.

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Expectations from the finance minister, as always, are high — people and corporates want more in their pockets. There has been no let-up in the rise of food prices and most middle-class families still have to wait for annual sales to get branded products home.

In other words, the nation would like to see changes in tax rates, consumables getting cheaper and credit continuing to be available easily.

When the world was teetering on the brink of recession, the UPA government had introduced three stimulus packages of tax cuts, higher spending on public projects and increased liquidity in the financial markets through an easy monetary policy of the Reserve Bank of India. These policy measures helped shore up India’s faltering economy and put it back on a growth path.

The incentives which were passed on to some sectors of the economy are still in place and experts say it is time for a gradual withdrawal.

The Congress-led government has been reassuring people that growth will not be derailed by any decision to withdraw stimulus, but analysts say it is treading a thin line between supporting the economy and inflaming inflation.

The government has pegged GDP (gross domestic product) growth for 2010-11 at 7.2 percent, up from a six-year low last fiscal, and said efforts will be made in the budget to lower fiscal deficit which is at a 16-year high of 6.8 percent of GDP.

Manufacturing too is forecast to grow 8.9 percent, a sharp rise from the 2.4 percent in the previous year.

A withdrawal of stimulus would mean taking away the incentives given to sectors like exports, textiles, manufacturing and infrastructure, which in turn would lead to tighter credit and escalation in prices of raw materials.

The RBI, which till now has resisted raising its key interest rate, is expected to do so in the coming months. This would make loans costlier for the common man and could subsequently lead to a decrease in demand for the realty sector and a fall in consumption.

It’s a delicate balance that the government must get right, but whether Pranab Mukherjee will introduce populist measures or toe a practical line and respond to the existing financial situation, is anyone’s guess.