Causality between Tourism and Economic Growth: Empirical Evidence from India P K Mishra Siksha O Anusandhan University, Bhubaneswar, Orissa, India E-mail: email@example.com Himanshu B. Rout Siksha O Anusandhan University, Bhubaneswar, Orissa, India E-mail: firstname.lastname@example.org Smita S. Mohapatra Siksha O Anusandhan University, Bhubaneswar, Orissa, India E-mail: email@example.com Abstract Tourism is one of the most important sectors in the world economy. It is now considered as an efficient tool for promoting economic growth of the host country. Since last few decades, tourism industry in India has been growing at a rapid pace and it has vast potential for generating employment and earning large amount of foreign exchange besides giving a fillip to the country’s overall economic and socio-cultural development. It is thus imperative to examine the dynamics of the relationship between tourism sector expansion and economic growth in India. This paper is an attempt in this direction. The study using popular time series models for the period spanning from 1978 to 2009, provides the evidence of long-run unidirectional causality from tourism activities to economic growth of the country. Therefore, as a part of the policy implications it is necessary that all wings of the central and state governments, private bodies and voluntary organisations should become the active partners in the endeavour to attain sustainable growth in tourism and overall economy as well.
Keywords: Tourism, India, Economic Growth, Cointegration, Granger Causality JEL Classification Code: C21, C82, O11, O41, L83
In recent years, the role of tourism in the economic development of a country has been the focus of study and research. It is the general consensus that tourism has been pivotal in social progress as well as an important vehicle of widening socio-economic and cultural contacts throughout human history. Over the past years, many developing and developed countries have considered tourism as an option for sustainable development of their nations. The importance of tourism as a contributor to economic growth is so widely accepted that year after year throughout the world a massive investment continues to pour in its development. Tourism has emerged from being a relatively small-scale activity into one of world’s largest industries and a fastest growing global economic sector of the world economy from the 1960s onwards. The international tourist arrivals have shown an uninterrupted growth from 25 million in 1950, to 681million in 1980, to 438 million in 1990 and to 681million in 2000. The international tourist arrivals 518
European Journal of Social Sciences – Volume 18, Number 4 (2011) were 880 million and the corresponding international tourism receipts was US$ 852 million in 2009. The tourist arrivals in Asia and the Pacific were 181 million and corresponding tourism receipt was US$ 204 million. As per UNWTO estimates, the worldwide international tourist arrivals increased by 7 per cent between January and June 2010. For the full year 2010, UNWTO projects a growth in international tourist arrivals of between 3 to 4 per cent. In 2010, tourism is expected to generate 21.7 per cent of world gross domestic product; 10 per cent of global capital investments; 9 per cent of worldwide employment; and 22.2 per cent of worldwide exports of goods and services. All these cast for a significant role of tourism sector in the long-run growth of host countries across the globe. It was in 1945 that the first ever step was taken to popularize the concept of tourism in India, by appointing the Sir John Sargent Committee which in 1946 submitted the report with suggestions of the formation of regional offices at Bombay, Delhi, Calcutta and Madras. And, it came into being in 1949 with the set up of a Tourist Traffic Branch along with two regional offices in Bombay...