The major concerns in India are political, bureaucratic, corporate and individual corruption majorly at the grass root level. A 2005 study conducted by Transparency International in India found that more than 55% of Indians had first-hand experience of paying bribes or influence peddling to get jobs done in public offices successfully. There are two faces of a coin, one good and the other bad. Similarly, tourism and its related activities have positive as well as negative impacts. The travel and tourism industry is a significant contributor to Indias GDP and the government is increasingly supporting its development through investment in infrastructure, promotions and tourism-friendly legislation. In 2009, tourism expenditure accounted for almost 4% of GDP. No doubt, tourism has provided better job avenues for the youth, has earned foreign exchange for the country, has brought India on the International platform and has promoted developmental activities but on the other hand it has also resulted in increased incidences of drug abuse, child labor, human trafficking and prostitution. Today, tourism is one of the worst hit industries in terms of corruption due to various factors like- bribery, Illiteracy, population growth, inefficiency of governmental agencies and poverty. The Central Vigilance Commission (CVC), a government watchdog agency of the Indian government, revealed irregularities in 16 Commonwealth Games projects, resulting in large gains for contractors and the delivery of poor infrastructure. Though the government has been trying to improve the above mentioned factors in the tourism industry by strengthening the Department of Tourism and its allied agencies, however, corruption is one such evil which is hampering the growth of tourism industry in India and needs to be eradicated. Through this paper we have made a conscious effort in highlighting the issues and the reasons behind them which pose a major threat to the development of tourism in India. The most important message is that corruption matters. Countries intending to benefit by tourism expansion must reduce or eliminate corruption to maximize the gains from tourism trade. The paper follows a primary and secondary research methodology where the data has been collected in the form of a questionnaire from tourist destinations like- Nainital, Bhimtal and Ramnagar.