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Tourism’s Revival: How Travel and Hospitality Impact India’s GDP?

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  • Post published:October 24, 2023
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Last Updated on January 24, 2024 by Kanakkupillai

India will soon reopen its borders to international tourism, providing relief to travel industry players while marking only an initial step toward the revival of an industry that contributes 6-7 per cent of India’s Gross Domestic Product (GDP).

Reducing foreign arrivals back down to pre-pandemic levels remains an enormously complex challenge.

Tourism provides vital employment in developing nations. Tourism accounts for roughly 10% of global GDP and one in ten jobs worldwide; its activities may harm local communities or the environment, including pollution issues. Tourism plays an integral role in fighting poverty while simultaneously empowering women, yet growth-inhibiting barriers still prevent the tourism industry growth from providing these benefits.

The pandemic has immensely affected tourism, with travel disruption lasting far beyond expected and GDP growth slowing as interest rates decrease. Governments now feel pressure to increase investments in this industry to generate jobs, promote economic recovery, and ensure its long-term sustainability.

Tourism arrivals must be increased through targeted fiscal and monetary incentives at both central and state levels, aligning them with regional and national policies designed to support sustainability by offering incentives such as special status for accommodations to facilitate lending, expanding destination access with reduced carrying capacity requirements and offering tourists diverse choices of destinations; etc.

Tourism plays an integral role in combatting climate change and biodiversity loss while at the same time helping address income disparity within societies. Tourism benefits all stakeholders while satisfying local populations’ and cultures’ needs and safeguarding cultural heritage sites for sustainable development.

Tourism-dependent economies should search for innovative methods of revitalizing their industry and increasing visitor numbers, such as revising holiday schedules or offering unique visa options. Costa Rica extended public holiday weekends specifically tailored towards domestic tourism, while Barbados offered yacht tourism a “Welcome Stamp” visa specifically targeting yacht tourism. Government officials should remain open to exploring innovative approaches to relaunch this sector cost-effectively and sustainably.

Increased GDP

Tourism and hospitality make a substantial and impactful contribution to global GDP; tourism is one of the world’s biggest industries, with direct and indirect contributions of 10% or higher (OECD, 2020). Due to the COVID-19 pandemic’s widespread impact, international tourism has experienced a dramatic decline globally – particularly negatively in tourist-dependent nations – leading the World Travel and Tourism Council estimates of up to USD 800 billion in lost earnings by 2022 (Kreiner & Ram, 202).

India has suffered serious consequences of the pandemic influenza on its tourism sector. Tourism contributed 7% of India’s economy in 2019 but only 4.3% by 2020 – this represents over 40 million lost jobs from this industry alone.

The revival of the tourism sector in India has shown great promise and, if proper steps are taken, can become an indispensable contributor to long-term economic development. Tourism companies should prioritize long-term sustainability by creating products tailored specifically for travellers.

Government support should also include financial assistance for tourism-related businesses by relieving liquidity constraints and making credit more readily available; this will allow them to relaunch operations and expand employment. State tourism packages should be promoted year-round along with enhanced connectivity through airports, heliports, water aerodromes and railways; personal income tax should be reduced to promote consumption while simultaneously increasing disposable income, thereby driving demand growth and tourism expansion.

India should prioritize sustainable tourism development by capitalizing on its diverse geography, cultural traditions and spiritual/philosophical insights. The government can promote medical tourism by offering high-end healthcare services and partnering with private hospitals, investing in tourism-related technologies that make destinations more appealing and competitive among consumer markets, or offering tax breaks to boost medical tourism spending. Tourism is pivotal in emerging economies like India and should be revitalized quickly to meet future demand. By taking these measures, tourism industries will rebound faster from current difficulties while becoming less susceptible to disruptions – aiding development efforts and providing job creation in emerging nations such as India.

Increased Exports

Tourism can directly affect GDP, employment and foreign currency exchange (foreign currency exchange). Tourism has quickly emerged as one of the key pillars of global trade. Economic transformation lies at its heart in its capacity to increase domestic and regional incomes, increase competitiveness, promote innovation and establish global markets for goods and services. In the long term, tourism can improve overall well-being and quality of life around the globe. Tourism was severely reduced during the COVID-19 pandemic; however, its growth is slowly rebounding – prompting governments to implement policies designed to foster its revival – such as encouraging sustainable tourism practices or diversification strategies or using technological solutions as part of recovery initiatives.

Tourism in India has undergone an incredible revival as its rich culture and biodiversity draw visitors from all around the globe. Tourists come for its snow-clad Himalayan Mountains, tropical rainforests and other places of natural beauty; also, Indian cuisine attracts travellers, further increasing demand for travel and hospitality services.

India has taken several measures to promote tourism. From subsidizing airfares and loan guarantees extended to tourism companies to launching the Incredible India digital platform and increasing budget allocation by Rs 5000 crore for tourism development – these have all contributed towards strengthening India’s economy with spending increases related to tourism spending.

Future tourism industry growth seems promising. Travellers from abroad will likely return as nations relax restrictions and revive economies via financial stimulus packages, marketing initiatives and promotional tools. Travellers should practice good hygiene while remaining socially separate to stay safe; clear information policies and reduced uncertainty also support tourism sector recovery; this may become particularly critical if an infectious virus reappears and new travel restrictions may become necessary.

Travel and tourism investment has emerged as a crucial catalyst of worldwide economic development. Contributing to GDP through supporting various industries – airlines, cruise ships, transits, trains and taxicabs; hotels; hostels; homestays/resorts renting rooms out; entertainment venues (amusement parks; casinos; theatres plus retail stores selling souvenirs); accommodation (hotels; hostels/homestays/resorts renting out rooms out) are some of the industries which contribute significantly. Tourism also contributes significantly to agriculture by spurring increased consumption of local products within tourist zones and drawing foreign exchange into economies as tourists spend money locally; tourism employs millions in developing nations while simultaneously fighting poverty; when managed correctly, it may even offer social/environmental advantages.

Tourism’s impact on economies largely depends on various variables, including economic growth and its drivers, fluctuations in growth-influencing factors, and a country’s reliance on tourism for its gross domestic product (GDP). Tourism remains an indicator worth considering when analysing national growth drivers.

Reviving tourism requires considering multiple variables; economic instability will likely affect demand, and long-term consumer trends may dictate where people travel and the activities they select as tourists. Sustainability will likely become increasingly important when selecting natural and regional tourist spots; shorter travel distances would help conserve natural resources while decreasing pollution emissions from visitors.

To support tourism development, the government has undertaken various initiatives. Adopt a uniform tourism policy across states and form the National Tourism Task Force with state tourism ministers and joint secretary-level officers from relevant central ministries serving on its membership rosters as members. Ministry of Tourism measures also include providing 24/7 toll-free tourist information helplines in multiple languages and an online platform with state-specific year-round tour packages displayed; credit guarantee schemes were set up for COVID-19-affected players while tax reduction/waivers helped further bolster this sector.

What Are the Effects of Tourism and Hospitality on India’s GDP?

Indian tourism and hospitality play an invaluable role in earning foreign exchange earnings, creating jobs, and showcasing India’s cultural richness internationally.

While the Covid-19 pandemic severely compromised travel and hospitality, they have since rebounded with renewed optimism. Here are just a few ways travel and hospitality contribute to India’s GDP: Increase Disposable Income.

Travel and hospitality industries form an indispensable cornerstone of any economy, contributing significantly to income generation, employment of local citizens, foreign exchange earnings, and growth of the local and regional economies.

India is an iconic travel destination renowned for its rich cultures and festivals from across the globe that lure travellers in from every direction. Spiritual tourism has steadily gained momentum within hospitality in recent years – giving Airbnb travellers more options when searching for accommodation solutions.

WTTC research indicates that India’s travel and tourism sector should surpass pre-pandemic levels this year due to robust domestic demand, resilient industry performance and growing interest among millennial travellers. Furthermore, efforts by its government to expand infrastructure development projects and foster e-commerce should help spur further expansion within this industry.

Travel and hospitality create jobs across a range of economic sectors, from hotels to airports, and provide individuals with opportunities to launch their own businesses. This drives greater employment growth by strengthening economic activity overall.

The Indian tourism industry has proven to be an efficient means for creating income and jobs, alleviating poverty and sustainable human development. Tourism also brings foreign exchange earnings domestically while simultaneously improving tax collection efforts, strengthening regional economies and supporting indigenous cultures and traditions.

Oxford Economics released a report showing that Airbnb provides India with new entrepreneurial and investment opportunities by fulfilling visitors’ modern tourist demands for local experiences, cheaper rates, longer stays, sustainable services like resource conservation programs, technology-enabled services, and digital applications. Hospitality entrepreneurs may capitalize on these shifts by adopting green practices into their accommodations while using digital platforms to market them and offer additional guest services such as health and safety protocols for guests’ safety.

Travel and hospitality enormously positively affect India’s GDP, contributing services like air transportation, hotels/resorts/hoteling facilities/leisure activities (festivals/casinos/shops/spaces/theatres, etc.), homestays or rented rooms through platform providers like Airbnb etc.

India was affected by the pandemic disruption, which decreased international travel, consequently increasing domestic tourism twice what had been forecast by the World Travel & Tourism Council over 10 years. Staycations became common within India for rejuvenation purposes, leading to working breaks or luxurious getaways within India more frequently; building of airports & heliports for regional air connectivity took place more frequently while reduced personal income tax rates boded well for long-term growth rates of both outbound tourism and domestic tourism twice that predicted by WTTC over 10 years.

Increased Taxes Tourism contributes both directly and indirectly to India’s GDP: directly in terms of supporting hotels, retail shops, transportation services and entertainment venues, and indirectly through government investments into infrastructure for tourism as well as expenditure by Indians employed within this industry.

Conclusion

Thanks to Airbnb, India’s travel and hospitality sector has experienced steady progress since the end of the COVID-19 Pandemic in 2019. Activity levels have almost returned to pre-pandemic levels across multiple sectors, including travel.

Not all employees within an industry benefit equally from COVID-19’s economic downturn; certain workers such as food-app delivery persons, taxi drivers and Airbnb hosts have seen it particularly hard; hence, it is imperative that policymakers gain insight into its effects on individual income and wages to take appropriate measures accordingly. Difference-in-difference estimation techniques and panel data of earnings of those employed within an industry provide policymakers with vital data sets that allow for just this purpose.

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