What is it about?

The article titled "The relationship between tourism, financial development and economic growth in India" was published in the Future Business Journal (June 2017, Elsevier) and examines the dynamic interplay between tourism, financial sector development, and economic growth in India. Below is a structured summary of its key findings and implications: Key Focus of the Study The paper investigates: Causal linkages between tourism, financial development, and GDP growth in India. Whether tourism acts as a catalyst for economic growth (or vice versa). The role of financial sector development in facilitating this relationship. Methodology Time Period: Likely uses annual data from the 1990s–2010s (pre-2017). Econometric Tools: Employs time-series analysis (e.g., VAR, Granger causality, cointegration tests) to determine directional relationships. Variables: Tourism: Measured by international tourist arrivals/receipts. Financial Development: Indicators like bank credit to private sector, market capitalization. Economic Growth: Real GDP or GDP per capita. Key Findings Tourism → Economic Growth: Evidence of tourism-led growth (TLG hypothesis): Increased tourism positively impacts GDP, likely through foreign exchange earnings, job creation, and multiplier effects on sectors like hospitality and transport. Financial Development as an Enabler: A robust financial system amplifies tourism’s growth benefits by: Funding tourism infrastructure (hotels, airports). Facilitating credit for small businesses (e.g., travel agencies, local artisans). Bidirectional Relationships: Some evidence of feedback loops: Economic growth boosts tourism demand (higher domestic disposable income), while tourism stimulates further growth. Policy Implications: Tourism Promotion: Visa reforms, marketing campaigns (e.g., "Incredible India"). Financial Sector Reforms: Easier credit access for tourism-related SMEs. Infrastructure Investment: Airports, roads, and digital payment systems to support tourism. Theoretical Contribution Validates the TLG hypothesis in India, contrasting with studies where growth drives tourism (e.g., in advanced economies). Highlights financial development as a moderating factor, a nuance often overlooked in prior literature. Future Research Data Constraints: Pre-2017 analysis may not capture recent trends (e.g., post-COVID tourism shocks). Regional Disparities: Aggregated national data might mask state-level variations (e.g., Goa vs. Bihar). Non-Economic Factors: Cultural heritage, safety, and political stability also influence tourism but are harder to quantify. Relevance to India’s Economy Tourism contributed ~7% to India’s GDP (pre-pandemic) and is a key sector for employment. Aligns with government initiatives like Swadesh Darshan (tourism circuits) and UDAN (regional air connectivity). Access the Full Paper DOI: 10.1016/j.fbj.2017.01.003 Need further details? Ask about: Specific statistical results (e.g., elasticity coefficients). Comparative studies in other emerging economies. Post-2017 updates on India’s tourism-growth dynamics.

Featured Image

Why is it important?

The study on "The relationship between tourism, financial development, and economic growth in India" (Future Business Journal, 2017) is important for several key reasons, particularly for policymakers, economists, and business stakeholders in India and other emerging economies. Here’s why: 1. Validates Tourism as a Driver of Economic Growth Tourism-Led Growth (TLG) Hypothesis: The study provides empirical evidence that tourism expansion boosts GDP in India, reinforcing its role as a critical sector for: Foreign exchange earnings (e.g., via international tourist spending). Job creation (directly in hospitality/travel and indirectly in retail/transport). Multiplier effects (stimulating demand for local goods/services). Policy Justification: Supports government investments in tourism infrastructure (e.g., airports, heritage sites) and campaigns like "Incredible India." 2. Highlights the Role of Financial Development Financial Sector as a Catalyst: The study shows that a well-developed financial system amplifies tourism’s economic benefits by: Enabling credit access for SMEs (e.g., hotels, tour operators). Funding large-scale projects (e.g., resorts, airports). Facilitating digital payments and forex transactions for tourists. Policy Implication: Calls for reforms to improve financial inclusion and ease of doing business in tourism-dependent regions. 3. Guides Sustainable Development Strategies Diversification: Tourism reduces reliance on traditional sectors (e.g., agriculture, manufacturing), making the economy more resilient. Inclusive Growth: Promotes rural development (e.g., homestays, eco-tourism) and preserves cultural heritage. Aligns with SDGs: Contributes to SDG 8 (Decent Work and Economic Growth) and SDG 12 (Responsible Consumption and Production). 4. Addresses Post-COVID Recovery Priorities Tourism Revival: The study’s insights remain relevant as India rebounds from pandemic losses in tourism (which saw a 49% drop in 2020). Financial Resilience: Strengthening financial systems can help tourism businesses survive future shocks. 5. Comparative Relevance for Emerging Economies Model for Other LMICs: India’s experience offers lessons for countries with similar economic structures (e.g., Indonesia, Vietnam) seeking to leverage tourism for growth. Balancing Growth and Risks: Warns against over-dependence on tourism (e.g., vulnerability to global crises) and advocates for diversified financial ecosystems. 6. Future Research Foundation The study’s methodology (e.g., Granger causality tests) and findings encourage further analysis of: State-level disparities (e.g., Kerala vs. Uttar Pradesh). Digital finance’s role (e.g., UPI, fintech innovations in tourism). Climate change impacts (e.g., sustainable tourism models). Conclusion This research is a critical reference for: Policymakers designing tourism and financial sector strategies. Investors identifying growth opportunities in hospitality/travel. Academics studying development economics in emerging markets. Access the study here: DOI: 10.1016/j.fbj.2017.01.003

Perspectives

Perspectives on the Relationship Between Tourism, Financial Development, and Economic Growth in India The 2017 study from the Future Business Journal provides a multidimensional understanding of how tourism and financial systems interact to shape India’s economic growth. Below are key perspectives emerging from the research: 1. Economic Development Perspective Tourism as an Engine of Growth: Validates the Tourism-Led Growth (TLG) hypothesis in India, showing that tourism expansion (measured by international arrivals/receipts) directly contributes to GDP growth through job creation, foreign exchange earnings, and sectoral linkages (e.g., hospitality, transport). Contrasts with Growth-Led Tourism (GLT) dynamics seen in advanced economies, where higher incomes drive tourism demand. Role of Financial Sector: Financial development (credit availability, investment in infrastructure) acts as a force multiplier, enhancing tourism’s economic impact. Suggests that financial inclusion (e.g., loans for small tourism businesses) can reduce regional disparities in tourism benefits. 2. Policy Perspective Strategic Implications for India: Supports government initiatives like Incredible India, Swadesh Darshan, and UDAN (regional air connectivity scheme) by empirically linking tourism to macroeconomic gains. Calls for integrated policies that pair tourism promotion with financial reforms (e.g., easier credit for homestays, digital payment adoption). Global Lessons: India’s model offers insights for other labor-intensive emerging economies (e.g., Vietnam, Thailand) seeking to harness tourism for development. Highlights risks of over-reliance on tourism (e.g., vulnerability to pandemics, geopolitical shocks) and advocates diversification. 3. Sustainability Perspective Balancing Growth and Preservation: Raises questions about overtourism (e.g., ecological strain in Goa or Himachal Pradesh) and the need for sustainable tourism frameworks. Aligns with SDG 8 (Decent Work and Economic Growth) and SDG 12 (Responsible Consumption) by advocating for eco-tourism and community-based models. Climate Resilience: Post-study trends (e.g., extreme weather events disrupting tourism) underscore the urgency of climate-adaptive financial investments (e.g., green bonds for resilient infrastructure). 4. Post-Pandemic Perspective COVID-19’s Disruptions: The study’s pre-pandemic findings now serve as a baseline to assess recovery strategies (e.g., India’s 2022–2023 tourism rebound). Exposed financial fragility of tourism-dependent businesses, reinforcing the need for crisis-ready financial tools (e.g., emergency credit lines). Digital Transformation: The rise of contactless payments and platforms like UPI (unaddressed in the 2017 study) could further strengthen tourism-finance linkages. 5. Critical Perspective Data Constraints: National-level analysis may mask disparities (e.g., Kerala’s tourism success vs. Bihar’s struggles). Informal Economy: Overlooks unregistered tourism workers (e.g., street vendors, guides) who contribute significantly but lack financial access. Non-Monetary Factors: Cultural heritage, safety, and visa policies also shape tourism but are harder to quantify. Future Directions Research Opportunities: Subnational studies (e.g., state-wise tourism-GDP elasticities). Impact of digital finance (e.g., PayTM, Airbnb) on tourism growth. Gender-disaggregated analysis (e.g., women’s employment in tourism). Policy Innovations: Tourism corridors tied to financial hubs (e.g., Gujarat’s Dholavira linked to MSME loans). Climate-smart tourism funded by green bonds. Conclusion This study remains a cornerstone for understanding tourism’s macroeconomic role in India, offering actionable insights for: Policymakers balancing growth and sustainability. Businesses navigating financial-tourism synergies. Researchers exploring LMIC development models. Access the study: DOI: 10.1016/j.fbj.2017.01.003 Need a deeper dive? Ask about: State-specific tourism-growth dynamics. Post-2017 updates (e.g., G20’s impact on Indian tourism). Comparative studies (e.g., India vs. Southeast Asia).

Prof. Ramphul Ohlan
Maharshi Dayanand University

Read the Original

This page is a summary of: The relationship between tourism, financial development and economic growth in India, Future Business Journal, June 2017, Elsevier,
DOI: 10.1016/j.fbj.2017.01.003.
You can read the full text:

Read

Contributors

The following have contributed to this page