September , 2018
Tourism turns a big contributor to GDP growth
17:24 pm

Tushar K. Mahanti

Travel and tourism sector is fast becoming an important contributor to economic growth. According to a recent re-port by World Economic Forum (WEF) travel and tourism industry accounts for 10% of global GDP and about 10% of jobs.

A huge number of people are travelling around the world – be it for work needs or for leisure – and the number is rising steadily with international arrivals growing from 25 million in the 1950s to 1.2 billion in 2016 and to an estimated 1.8 billion by 2030. The industry is proving resilient to both geopolitical uncertainty and economic volatility.

India’s tourism competitiveness index improves

India with its vast expanse of natural beauty, numerous historical monuments and age-old religious destinations is a front-runner to this growth. It has improved tremendously in travel and tourism competitiveness index, rising from 65th position in 2013 to 40th position last year among 185 countries in The Travel & Tourism Competitiveness Report 2017, prepared by WEF.

Tourism has become a priority area in India for its ability to make a real difference to the lives of people by driving growth, creating jobs, reducing poverty and fostering development and tolerance. India offers a diverse portfolio of niche tourism products such as cruises, adventure, medical, wellness, sports, eco-tourism, spiritual and religious tourism. India has been recognized as a destination for spiritual tourism for domestic and international tourists. The country has everything – from over 7,000 km of coastline, rain forests, deserts and snow-capped mountains to temples, mosques, wildlife, tribal habitation and a multicultural population. India’s multi-dimensional culture and natural beauties seem to have been attracting foreign tourists in growing numbers.

Foreign tourist arrivals and forex earnings rise

This is reflected in the steady rise in the number of foreign tourist arrivals in the country. The number has increased from 1.81 million in 1981 to 8.8 million in 2016. In 2016 foreign tourist arrivals in India increased 9.7% over the previous year. The international tourist arrivals have increased 8.64% annually compounded between 2000 and 2016. The trend has continued and during January- November 2017 the number arrivals have increased by a huge 15.6% to 1.18 million.

The rise in tourist arrivals has simultaneously increased India’s foreign exchange earnings too. According to estimates of ministry of tourism the foreign exchange earnings from tourism have increased 14% in 2016 from Rs. 1.35 lakh crore in 2015 to Rs. 1.54 lakh crore in 2016. In dollar terms earnings have increased from 21.07 billion to 22.92 billion during the same period. According to provisional estimates of the ministry of tourism forex earnings have increased 17% in 2017 to Rs.1.80 lakh crore. The importance of the sector in earning foreign exchange will be vivid if we anlyse the growth trend for a longer period. In ten years between 2007 and 2017 forex earnings from tourism have increased more than four times from Rs. 44 thousand crore to Rs.1.80 lakh crore. In dollar terms earnings have increased about 160% during this period from 10.72 billion to 27.69 billion.

Back home, domestic tourist visits to the states/UTs grew by 12.7% y-o-y to 1.61 billion in 2016 with the top 10 states/UTs contributing more than four-fifths of the total number of domestic tourists, as per ministry of tourism.
In last ten years, between 2006 and 2016, domestic tourist visits have gone up three and a half times from 46.24 crore to 161.35 crore.

Tourism turns big contributor to GDP and job growth

The increase in both foreign tourist arrivals and domestic tourist visits had significant impact on employment generation. The industry provides employment to skilled, semi-skilled and unskilled labour directly and indirectly. Providing the industry with skilled manpower is imperative for India’s growth.

According to World Travel and Tourism Council’s (WTTC) report ‘Travel & Tourism: Economic Impact 2018 India’ travel and tourism sector generated 26.15 million jobs directly in 2017 (5.1% of total employment). This includes employment by hotels, travel agents, airlines and other passenger transportation services. This is projected to increase by 2.8% to 26.88 million in 2018.

The total contribution of travel and tourism to employment (including wider effects from investment, the supply chain and induced income impacts) was 41.62 million jobs in 2017 (8.0% of total employment). The number is projected to rise by 3.1% to 42.90 million jobs (8.1% of total employment) in 2018. By 2028, travel and tourism sector is forecast to support 52.28 million jobs (8.4% of total employment), an increase of 2.0% annually over the period.

The rise in earnings and employment of the sector has resulted in significant contribution by the sector to country’s GDP. The total contribution of this sector to GDP was Rs. 14,018.5 billion or about 9.6% in 2016. The sector’s contribution to GDP rose to Rs. 15,239.6 billion in 2017. Its share in GDP, however, has declined marginally to 9.4% in 2017. The contribution of the sector is forecast to rise by 7.5% in 2018, and to rise by 6.9% annually to Rs. 32,053.3 billion accounting for 9.9% of GDP in 2028.

According to WTTC report investment in travel and tourism in India was Rs. 2,706.1 billion or 6.3% of the total investment of the country. It is expected to rise by about 6.7% annually in the next ten years to Rs. 5,548.3 billion by 2028.

Road map for future growth

The launch of several branding and marketing initiatives by the Government of India such as ‘Incredible India!’ and ‘Athiti Devo Bhava’ has provided a focused impetus to tourism growth. The Indian government has also released a fresh category of visa - the medical visa to encourage medical tourism in the country. Incredible India 2.0 campaign was launched in September 2017. The Government of India is working to achieve one per cent share in world's international tourist arrivals by 2020 and two per cent share by 2025.

The Government has also been making serious efforts to boost investments in tourism sector. In the hotel and tourism sector, 100% FDI is allowed through the automatic route. A five-year tax holiday has been offered for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai). Total FDI received by Indian hotel & tourism sector was US$ 11.28 billion between April 2000 and March 2018. Right now travel and tourism industry supports about one in every ten jobs in the country and is proving a dynamic engine of employment growth. Inclusive growth and ensuring a future with quality jobs being stated objectives of the government the tourism sector needs a special importance in policy making.


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