Impact of Tourism On Indian Economy - A

Snapshot
Globalization

Auroubindo Ganesh1, Dr. C. Madhavi2

of
development bears the efficacy of earning more. The

programmes has raised the foreign

developing countries have points in

exchange requirements of developed

favour of tourism industry which shows

as well as the developing countries. A

multiplier effects and simplifies the task

number of manufacturing and non-

of

manufacturing,

environmentalists, social scientists and

traditional

and

non-

traditional industries, no doubt, have

same time, the harmful side effects

have resulted in atmospheric pollution.
In addition, the inadequacy of financial
resources has also been an important
barrier in speeding up the process of
economic

transformation.

The

magnitude of competition is found at

peak, which necessitates world-Class
excellence for excelling competition.
Amidst

all

these

development

of

constraints,
tourism

the

industry

appears to be an important solution.

Tourism,

both

international

and

domestic, brings about an intermingling

of people from diverse social and
cultural

backgrounds,

and

also

considerable spatial redistribution of

spending power, which has significant
impact

on

the

economy

of

the

destination area. We do not find any

planners,

economists.

helped them in their stupendous task of

industrial transformation but at the

manpower

An analysis of positive effects

makes it clear that to be more specific
the developing countries like ours
should change our priority order and
should give due weightage to the
development of tourism industry. The
tourism is now rightly added to the long
list

of

established

tremendous

industries

economic

and

with
social

potentiality. The income generation and

employment capability of the industry
are quite considerable. In fact tourism
industry

especially

for

developing

countries acts as a greatest leveler in

time of economic recessions. This
chapter presents the impact of tourism
industry in India with regard to various
fronts such as economic front, social
front,

cultural

and

historical

front,

environmental front and political effects.

exaggeration in the opinion that tourism

Economic Front

or

The tourism must be utilized as a

travelling

business

has

been

declared an industry since with the

vehicle

least possible investment~ this industry

International tourism is an invisible

for

economic

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

Research Scholar, Department of management studies, Annamalai University.1
Professor, Department of management studies, Annamalai University.2

development.

235

export that creates a flow of foreign

a country, requires the existence of an

currency

infrastructure,

into

destination

the

economy

country,

of

there

a
by

as

accommodation

well

and

as

other

hotel
facilities

contributing directly to the current

specific to tourism. In many cases

account of the balance of payments.

these

Like other export industries, this flow of

indivisible in the sense that, in providing

revenue creates business turnover,

them for the tourism industry, they at

household income and employment

the same time become available for the

and

use of local people. Thus in many

government

revenue.

The

utilities

are

economically

generation process does not stop at

countries,

this point however some portion of the

constructed

money

tourism, now provide an access to

received

establishments,

by

the

business

individ.uals

and

wider

highways

and

primarily

markets

to

for

airfield,
cater

many

for

locally

government agencies is re-spent within

produced goods. Unfortunately, in a lot

the

by

of case, however, the local people still

creating further rounds of economic

receive little direct benefit from these

activity. The secondary effects can in

developments. This in essence is a

total considerably exceed in magnitude

problem of both physical and economic

the initial direct effects. Moreover,

distribution.

destination

economy

there

tourism seems to be more effective

than other industries in generating

As tourism continues to grow in a

employment and income in the less

region it makes increasing demands

developed often-outlying regions of a

upon the scarce resources of that area.

country where alternative opportunities

So there is a need for realistic planning

for development are more limited.

and

Indeed, it is these areas that tourism

planning regulations to reduce possible

can make its most significant impact.

conflicts of interest to conserve unique

The introduction of a tourism industry

and unusual features for the enjoyment

into

of future generations of visitors and

such

areas

can

have

proportionally very much grater effect

on

the

population

welfare
that

of
the

the

resident

same

amount

tourism have on the more developed

parts of the same country.
The

development

effective

enforcement

of

residents alike.
Tourism is considered to be an
economic

bonanza.

It

is

multi

segment industry. While gauging the

positive economic effects of tourism, we

of

tourism,

especially in an underdeveloped part of

236

the

study its contribution to the generation

of

national

income,

expansion

of

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

employment opportunities, raising of tax

requires

revenue,

generation

besides,

exchange

.and

of

foreign

transformation

number

the

of

tourist

personnel,
organization

of

employs suitable persons. Thus, the

regional economy. All these positive

total employment generated by this

effects are explained below:

sector

is

the

total

employment

generated by its different segments.

Generation of National
Income
Tourism
successful

has
in

proved

generating

to

Further,

be

national

income. Being a multisegment industry,

the

hotel

and

restaurants,

transportation services, tourist resorts,

amusement
centers,

parks,

sales

entertainment

outlets

the

employment

of

curios,

handicrafts, jewelleries etc.

provide

generation

of

opportunities

indirect
is

its

outstanding feature. It is a highly labour

intensive industry in which we fine
different types of employment to skilled,
semi-skilled and unskilled persons. The
direct employment generated by the
tourism industry in India is to the tune of
10 million, which makes about 2.5% of
the total labour force in the country.
The labour-capital ratio is one of

services to both tourists and nontourists. The modest contribution of

the

tourism industry to the NNP is a

generation of jobs for an investment of

staunch testimony to its proposition that

rupees 1 million (at 1985-86 prices) in

it contributes a lot to the process of

the tourism sector is estimated to be

national income generation. To be more

around 50 against a figure of around 12

specific

recorded by the manufacturing sector.

the

domestic

tourism

highest

in

The

industry is that it employs number of

account for a 5.6 percent of GDP and

skilled and educated women. Women in

accounts for 10.8 percent of total

fact outnumber men in hotels, airline

exports.

services, travel agencies, handicraft

opportunities
contribution

is
of

employment

an

outstanding

tourism

industry.

Particularly the hotel and restaurant

sector employs a good number of
skilled and semiskilled personnel. In
addition,

the

transport

sector

also

of

The

The travel and tourism contributes an

of

feature

sector.

contributes a major share to the NNP.

Expansion

significant

this

tourism

and cultural activities. The indirect

employment in the case of tourism is
fairly high and is estimated at 2.358. If
the direct employment is 1 in the
tourism

sector,

the

generated

employment is 1.358 persons in other

sectors of economy due to linkages
with tourism.

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

237

Raising of Tax Revenue

host region retains 93 percent of the

earnings in the foreign currency by the

The tourism sector contributes a

tourism sector.

lot to the exchequer in the shape of

The

taxes. This is collected from its different

generation

exchange

context, this industry has not been

tourism grew from Rs. 2,613 crores in

making a handsome contribution to the

1990-91 to Rs. 13, 166 crores in 1999-

tax revenue since the tax concession is

2000. The average annual growth rate

allowed at different stages. It is natural,

of

especially

of

account of tourism is q.32 percent.

development. Gradually, the magnitude

Therefore tourism industry is making its

of tax concessions allowed shows a

contribution towards Indian economy in

down ward trend and the contribution of

order to make it as a balanced one.

at

the

initial

stage

on

foreign

segments. Particularly in the Indian

foreign

earnings

of

exchange

account

earnings

of

on

this sector to the tax revenue reaches

its peak. Globally the tourism sector
accounts for 10.5 percent of GDP while

Transformation of
Regional Economy

in India tourism accounts for only 1.15

percent of DGDP. The finance ministry
has admitted the service sector (of
which tourism is major part) contributes
as much as 50 percent to the GDP.

Generation of Foreign
Exchange
This sector of the economy is

The process of capitalization of the

available economic resources is found
significant to transform the economy of
rural and backward regions. An expert
of ESCAP says, Exploitation of rural
areas and the less developed interiors
becomes significant in this very context.
The development of outdoor, treks,
beaches, hills and, mountains, resorts

found efficacious in generating the

etc.

foreign exchange reserve. To be more

backward areas has constructive effect

specific

world

on re-distributing the earnings. further

tourism to the foreign exchange is

the development of Khajuuraho in MP.

supposed to be the succulent benefit of

Kovlam in Kerala and Gulmarg in

tourism

developed

Jammu and Kashmir give positive

countries of today testify it. They have

evidences for contribution of tourism to

been found successful in minimizing

the development of backward areas in

their foreign exchange crisis with the

India.

the

contribution

industry.

The

of

particularly

in

the

rural

and

revenue generated by this sector. The

238

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

If we turn our eyes on their past, it

population

is apparent that till a few years ago, all

fostering

of

them

as

better

means

towards

understanding

and

were

relatively

unknown

goodwill between nations has been

with

dismal

economic

extolled as a major social benefit

activities, inhabited by traditional rural

obtained Tom tourism. Widening of

folk.

fare

social opportunities, setting up of the

internationally known. A good number

nations social life, promotion of inter-

of skilled and semiskilled or even

regional

unskilled

understanding,

villages,
Of

late,

local

these

places

people

are

found

and

intra-regional

creation

of

nation

employed in tourism or other ancillary

identity and nation integration are some

industries

of the important positive effects of

furthering

socioeconomic

justice with the help of equitable

tourism

distribution of economic benefits.

transformation.

Development of Art,
Handicrafts and Monuments

industry

Against

this

on

social

background

we

consider tourism a sensitive device to

speed

up

the

process

of

social

A society endowed with art and

transformation. An expansion in the

culture along with lively custom and

social opportunities is found to be

cheerful public life is found helpful in

impact generating since the general

promoting world tourism. This industry

masses have an intercourse with the

provides sufficient motivation for the

people of different places and regions

promotion and preservation of an art,

which in a very natural way help them

crafts and culture, which is appreciated

in speeding up their learning cycles.

by the external community. Tourism can

This helps in setting up the nations

stimulate high quality revivals of craft in

social life in which we find the very little

particular. The growth of tourism in

scope for narrowing the thoughts and

such

ideas.

areas

may

provide

also

The

strengthening

of

inter-

monetary incentive for the continuance

regional

for many local crafts, while the tourist

understanding thus becomes possible

hotels may create a market for local

which activates the process of social

produce.

cohesion. The creation of national

industry helps in projecting a positive

The merit of social intercourse

tourists

intra-regional

identity is possible since the tourism

Social Front
between

and

and

indigenous

national image. The combination of

multi-faced

social

effects

makes

possible national integration as people

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

239

of many culture and religion meet

monuments and cultural heritages. The

together and evince interests in sub

protection of architectural wonders and

serving national interests. In a true

landmarks of the glorious ancient past

sense, tourism is basically a social

help in promoting cultural tourism.

activity, which in addition to the national

understanding

paves

ways

Envlronmental Front

for

international understanding, projection

the

manufacturing

industries pollute water, air and sound

contraction in the ideological gaps and

and make the environment unhealthy

speeding awareness of world affairs. It

for the living beings. This is an

cant be refuted that stirring up of the

important

nations social life is possible with the

industrialization,

development of tourism industry. The

development of nontraditional industries

aforesaid facts are a strong testimony

in general, and the tourism-industry in

to this proposition that the development

particular. With the development of

of tourism instrumentalists the process

tourism industry, we find ample scope

of social transformation.

for making the environment pollution

negative

effect

which

of

necessitates

free. The tourist centers like national

Cultural and mStorical

Front

parks, hill stations, wild life and bird

sanctuaries, and gardens etc. helps in
of

maintaining the ecological balance.

cultural heritage is found to be an

Thus, we find here two-tier positive

outstanding benefit of tourism industry.

impact; first the environment is kept

Cultural purity is a virtue of the society.

free from the smoke or other industrial

The catalytic role of tourism in boosting

hazards and second, the tourist centers

growth

and

directly contribute to the ecological

maintaining monuments and heritage

balance. It is against this background

contribute a lot to the process of

that environmentalists recommended

cultural

for the planned development of tourism

Revival

and

of

strengthening

art,

protecting

transformation.

soeiety

endowed with art and culture, lively

240

Generally,

of a fair national image of abroad,

customs

and

cheerful

naturally

attract

public

tourists.

monuments

are

permanent

structure

life

Some

supposed
of

industry.

to

Political Effects

of
be

cultural

The political costs and benefits of

tourism, which are

the virtues of

heritages. The development of tourism

international tourism have been extolled

industry

as

helps

in

protecting

these

major

force

for

peace

and

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

understanding
Empirical

between

description

nations.

and

population.

It

is

apparent

such

insightful

discrimination can foster resentment

analysis of various combinations of

and scan sour international relationship.

these situational pressures and cultural

norms are greatly needed to increase
our knowledge of social relationships
and determine what steps could be take
to increase the likelihood that touring
will, indeed, contribute to understanding
and amity among nations. The reality is
often a far remodel from this utopian
image.

Long-haul

travel

between

developed and developing countries is

increasing annually and is bringing into
direct contact with each other people
from widely different backgrounds and
with very contrasting life styles and
levels

of

income.

Where

these

Domestic tourism on the other

hand can act as an integrating force
strengthening

national

sentiment.

Traditionally pre-occupied people in

outlying areas can travel to other parts
of our country and can begin to
experience

pride

in

their

national

heritage. A sense of nationality may

help to prevent regional fragmentation.
Mixing of peoples from different regions
of a country can produce a better
understanding of each others way of life
and a better appreciation of problems
specific top particular region.

disparities are very great the political as

The

economic

contribution

of

well as the socio-cultural consequences

tourism is generally measured in terms

may be severe. In extreme cases

of its contribution of tourism to gross

international tourism has imposed a

domestic

form of neo-colonial type development

generation. Tourism is considered to be

upon emerging nations. Quite simply,

an economic bonanza. It is a multi-

this neo-colonialism takes power from

segment industry. While gauging the

the local and regional levels and

positive economic effects of tourism, we

concentrates it into the hands of multi-

study its contribution to the generation

national companies. These companies

of

will negotiate only at national levels and

employment opportunities, rising of tax

expects any problem to be solved by

revenue,

generation

the

exchange

and

national

operational

government.
level

the

At

high

the
paid

product

national

and

income,

employment

expansion
of

of

foreign

transformation

of

regional economy.

respectable positions are occupied by

the expatriates who posses expenence,
while the lower paid, more menial jobs
are

reserved

for

the

indigenous

Conclusion
In this article an analysis of
tourism impact provides the snapshot of

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007

241

the positive impact of tourism. Of

responsible tourism will give a different

course the development of tourism

emphasis to the continuing debate

industry should take place without

amongst the various groups in society

environment
such

degradation.

Concepts

and may change the perceived balance

sustainable

tourism

between the positive and negative

responsible

effects of tourism in the future. With

as

development

and

the

consumption of tourism are seen as the

good

answer,

however,

along

with

the

enhanced

tourism

and
can

planning,

provide

an

planning and management of tourism.

impetus for the preservation of ancient

There fore the government and the

cultures. Environmental degradation on

tourism industry can act as a catalyst in

account of tourism can be an offshoot

brining the tourism development without

but there must be high quality planning,

environmental degradation.

design and management to educate

It is, however, heartening that the

current

242

management

pressure

for

sustainable

tourists to appreciate the environment.

Otherwise tourism will kill tourism.

Journal of Contemporary Research in Management, Volume-1, No.1, 2 Jan - June 2007