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Tourism Industry & Indian Economy

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Page 1: tourism industry and indian economy

Tourism Industry & Indian Economy

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Introduction• In a country as diverse and complex as India, it is not

surprising to find that people here reflect the rich glories of the past, the culture, traditions and values relative to geographic locations and the numerous distinctive manners, habits and food that will always remain truly Indian, according to five thousand years of recorded history.

• The tourism industry in India is substantial and vibrant, and the country is fast becoming a major global destination. India’s travel and tourism industry is one of the most profitable industries in the country, and also credited with contributing a substantial amount of foreign exchange. This is illustrated by the fact that during 2006, four million tourists visited India and spent US $8.9 billion.

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Tourism & Indian Economy

• Tourism industry has become an important part of the Indian economy. Its contribution to the GDP and to the employment in the country is close to 6% and 9% respectively for the year 2005-06 and 2006-07. This industry is one of the major foreign exchange earners in India. The tourism sector is linked to many other sectors of the economy, affecting the growth and employment in those sectors.

• Several reasons are cited for the growth and prosperity of India travel and tourism industry.Disposable income in India has grown by 10.11% annually from 2001-2006, and much of that is being spent on travel.

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• Today Indian economy depends a lot upon its invisibles and tourism sector is a major part of it. “It is a treat to watch such type of unity” remarked the President of India at the inauguration of fifth Global Travel and Tourism Summit in New Delhi on 8th April, 2005.

• Indian tourism crossed 3 million mark (3.37 million) in number of arrivals of foreign tourists in year 2004, showing a remarkable growth of 24 % over the previous year. The number of foreign tourist arrivals in 2004, 3.37 million, in India formed 0.44% of total world foreign tourist arrivals. The foreign exchange earnings have also grown by 38% to US$ 4810 billion.

• The total contribution of this sector, direct and indirect, to Indian GDP is around 5.83%.This sector is directly and indirectly linked to many other sectors in the economy. A growth in tourism industry affects industries like handicrafts, handlooms, transportation (mainly aviation), real estate (or infrastructure) and many more. One of the major sectors to which tourism is linked to is Real Estate

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• Both these sectors act complementary sectors to each other. More the number of tourist arrivals more is the requirement of better infrastructure, hotel, restaurants, houses etc. The point to be noted over here is that this real estate sector is not a stand alone sector. It is further linked to more than 200 different sectors like cement, steel, glass, electrical, water supply, carpentry, transportation and many more.

• Another major aspect of the tourism industry is the employment opportunities attached to it. Tourism industry is the largest employer in the world. In India, the direct employment from tourism contributes to 4.59% of the total employment in the country. Adding the indirect employment to it, the figure goes up to 8.27% i.e. the total employment generated by the industry in India is around 40 million.3 Also, 50% of this employment generated is indirect. This means that the growth in this industry has a strong impact on the employment in other industries also.

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• The year 2004-05 saw tourism emerging as one of the major sectors for growth of the Indian economy; the foreign exchange earnings increased from Rs. 16,429 crore to 21,828 crore. In 2006, the tourism industry registered a growth rate of 17.3% in foreign tourist arrivals, which has been the highest in last 10 years. Foreign exchange earnings grew at an even higher rate 30.2%.

• India tourism industry is thriving due to an increase in the arrival of foreign and greater than before travel by Indians to domestic and abroad destinations. The visitors are pouring in from all over the world: Europe, Africa, Southeast Asia and Australia. At the same time, the number of Indians traveling has also increased. Some tourists come from the Middle East to witness the drenching monsoon rains in India, a phenomenon never seen in desert climates.

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• The disastrous tsunami didn’t affect India’s tourism industry, as tourist arrivals in India rose 23.5% in December 2004 and tourist arrivals crossed the 3 million mark for the first time in 2004.

• Global recession has failed to affect Kashmir tourism industry as more and more tourists continue to throng the valley.According to the players in the tourism industry, many domestic tourists have already cancelled their tours to European countries and are coming to Kashmir valley. This has helped to increase the number of footfalls in Kashmir.

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Medical Tourism • The next big opportunity in Indian Tourism industry could be Medical

Tourism. Medical tourism has the potential to generate Rs. 10,000 crore. To cater this opportunity, the Tourism Ministry of India has set a target of attracting one million medical tourists by 2010. It has the potential to become a major driver of Indian economy like Information Technology. The medical procedures in India are much cheaper as compared to US and European countries.

• For example in April 2005 Madras Medical Mission hospital successfully completed a complex heart operation for US$8000 on an 84 year old patient which would have cost US$40,000 in US. Another advantage for India is that, it can provide many medical treatments at one place, like yoga, meditation, ayurveda, and allopathy. Indian government is also taking steps to promote Medical Tourism.

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LeakagesThough the tourism industry is booming and helping both

Indian and world economies to grow, there are a few downsides to this industry. A huge seasonal employment

exists in this sector. This seasonal employment is mainly in developing countries where tourism industry is not much

developed. In these countries for a few months the tourism is low and comparatively fewer workforces are required. Here the jobs are also under paid when compared to the similar jobs in developed countries and are in unsociable hours.

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• The term Leakage means that out of the total amount of money spent on the tourism of a country, a major part leaks out of that country (mainly developing) to the other countries (mainly developed). This leakage occurs when the host country wants to provide international facilities to their tourists. This leakage can be “internal leakage” or external leakage”.

• Many times the tourists arriving the host country demand for the goods like some equipment, food, drinks etc. which the host country cannot provide them. This leads to internal leakage because to fulfill the needs of tourists, the host country has to import these goods from other countries. External leakage occurs because; these host countries (mainly developing) might not have enough capital to build an infrastructure to attract foreign tourists, which calls for an investment from foreign countries (mainly developed). Now these external investors are a part of their business and will take a major part of there earnings. In India the leakage is around 40%, i.e. 40% of the earnings generated by India tourism leaks out of the country.

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Steps taken by Government

• The Government of India has adopted the policies which are benefiting Tourism in India. Improved tourist infrastructure, enhanced air connectivity, improved road infrastructure, road shows in Europe and many other initiatives have helped Indian Tourism. The Budget 2006-07 also mentions about the development of 15 tourist destinations and circuits. It will identify 50 villages with core competencies in handicrafts, handloom, and culture close to these circuits and develop them. Four new hotel management institutes will be established.C Along with this, the reduction in FBT (fringe benefit tax) on travel and hospitality will also help the industry.5 In 2004-05, a nation wide campaign was launched, for generating awareness about the effects of tourism and preservation of our rich heritage & culture, cleanliness and warm hospitality.

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• Leakage, wars, tsunami and bird flu etc. are serious problems that have a significant affect on tourism. But, these are not the elementary problems. Infrastructure is one primary problem to many industries in India. Infrastructure in India has improved but still it is far from what is required to become a world tourist destination. Another one is the infamous corruption of India, which is a major obstacle to the tourism industry. Resolving these issues will itself help in overcoming other smaller problems mentioned above.

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• Government of India has a target of 10% GDP growth rate, with the present growth rate at around 8%. To maintain such a high growth rate and increase the employment opportunities also at the same rate, it has to exploit the highly potential and growing sectors like Tourism. And, to fully exploit these sectors, problems related to these sectors should be addressed along with the fundamental issues like infrastructure and corruption.

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