Academic journal article IUP Journal of Business Strategy

Tourism Expansion, Urbanization and Economic Growth in India: An Empirical Analysis

Academic journal article IUP Journal of Business Strategy

Tourism Expansion, Urbanization and Economic Growth in India: An Empirical Analysis

Article excerpt

(ProQuest: ... denotes formulae omitted.)


Over the decades, tourism as an industry has experienced continuous growth and deepening diversification to become one of the fastest growing economic sectors in the world. Tourism has become an important sector that has an impact on development of national economy. It is also observed that foreign tourism has a positive effect on the long-run economic growth through different channels. First, tourism is a significant foreign exchange earner which allows for payment of imported capital goods or the basic inputs used in the production process. Second, tourism plays an important role in stimulating investment in new infrastructure and competition between local firms and firms in other tourist countries. Third, tourism encourages other economic industries by direct, indirect and induced effects. Fourth, tourism helps generate employment and increases income. Fifth, tourism can cause positive exploitation of economies of scale in national firms (Fagance, 1999; Lin and Liu, 2000; Andriotis, 2002; and Schubert et al., 2011). Finally, tourism is an important factor in the diffusion of technical knowledge, stimulation of research and development and the accumulation of human capital.

In the emerging economies, tourism has become a very important element in all policies related to urban development; it is not just a strategy to provide a competitive product to meet visitors' expectations but a way to develop the city itself and provide more and better infrastructures and bring conditions to residents. Tourism needs the diverse and flexible products urbanization can offer and urbanization needs tourism to achieve its social and economic objectives.

Tourism has become a focal point for emerging Asia-Pacific nations like India. Tourism is also one of the major sectors of the economy, contributing a large share to the National income and generating huge employment opportunities. It has become the fastest growing service industry in the country with great potential for its further expansion and diversification. India has been one of the most dynamic tourism markets over the past two decades and has become the world's topmost important country in terms of international tourist arrivals. Table 1 presents the trends in international tourism arrivals and economic growth in India.

Table 1 reveals that the number of tourist arrivals in India has consistently increased from 2.1 million during 1995 and to 7.1 million in 2014. India complements Asia's newest prospects for economic superpower status with the proud heritage and culture. As a result, India's tourism industry is experiencing a strong period of growth, driven by the burgeoning middle-class (for domestic and outbound travel) and growth in high-spending foreign tourists. The tourism industry in India has the potential and the required vibrancy and is fast becoming a major global destination as well as an outbound visitor generating market. However, the contribution of international tourism receipts towards GDP is found to be meager and ranges between 0.70% and 1.02% throughout the study period. Table 2 presents the trend of international tourism arrivals and urbanization in India. Urbanization, represented by total urban population, and tourists arrivals in the Indian economy have been steadily growing. The total urban population rose to 419.23 million during 2014 from 255.66% in 1995. Simultaneously, the number of foreign arrivals visiting India has been consistently increasing.

India's changing urban landscape has become the engine for attracting foreign tourist arrivals and economic growth. According to the Ministry of Urban Development and the National Institute of Urban Affairs (NIUA), more than 50% of India's population will be living in urban areas by 2039. With rapid urbanization, India is embracing the push to create smart cities. Simultaneously, Indian cities are aggressively looking to improve their infrastructure as well as the quality of life for their inhabitants. …

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