The travel and tourism industry has emerges as one of the rapidly growing service sectors contributing significantly to global economic growth and development. In developing countries like Indian tourism has become one of the important sectors of the economy, contributing to a large proportion of the national income and generating huge employment opportunities. Tourism is one of the largest service industries in terms of gross revenue and foreign exchange earnings. Tourism growth has implications for employment, as tourism generates employment at all skill levels. This paper attempts to estimate total direct employment generated in India by foreign tourism. This paper discusses how India is emerging as popular tourist destination in the world, driven by the focus on innovation and creating value for tourist. It also examines the impact of India’s economic growth on tourism, Contributors to economic growth, Role of Tourism industry in India’s GDP. The paper also explores that there has been a tremendous growth in tourism in India because of the policies of the government and support from all levels.

1. TRADE LIBERALIZATION AND IMPACT IN INCLUSIVE GROWTH OF TOURISM
INDUSTRY IN INDIA
Dr. Vinay Joshi Chandniwala
Associate Professor
Jagran Lakectiy University Bhopal
ABSTRACT
The travel and tourism industry has emerges as one of the rapidly growing service sectors
contributing significantly to global economic growth and development. In developing countries
like Indian tourism has become one of the important sectors of the economy, contributing to a
large proportion of the national income and generating huge employment opportunities. Tourism
is one of the largest service industries in terms of gross revenue and foreign exchange earnings.
Tourism growth has implications for employment, as tourism generates employment at all skill
levels. This paper attempts to estimate total direct employment generated in India by foreign
tourism. This paper discusses how India is emerging as popular tourist destination in the world,
driven by the focus on innovation and creating value for tourist. It also examines the impact of
India’s economic growth on tourism, Contributors to economic growth, Role of Tourism industry
in India’s GDP. The paper also explores that there has been a tremendous growth in tourism in
India because of the policies of the government and support from all levels.
Key words: Tourism Business, Foreign Tourist, Employment
INTRODUCTION
Tourism is one of the world’s fasts growing industries as income is generated by the
spending of goods and services required by tourists. Tourism Industry is the most vibrant tertiary
activity and multibillion industries in India. In India, tourist comes from all over the world to
experience their rich historical, religious and culture background. Tourism on the other hand, has
contributed to the increased rate of economic development due to government’s support through
reforms in trade liberalization. This has been highly appreciated and embraced by the tourism
industries and many international companies have heavily invested in India. The reforms have
also benefited the Indian Tourism Industry by getting different skills from other tourism
industries all over the world.
Tourism has been a key sector earning foreign exchange for Indian economy and
contributing significantly to GDP. According to World Travel and Tourism Council (WTTC)
annual report 2014, every $1 million in travel and tourism spending in India generates $1.3
million in GDP. It has been working as a harbinger of 'more inclusive growth' in India by
promoting other industries inside the economy through backward and forward linkages and
generating employment in various sectors such as hospitality, travel, and entertainment.
According to WTTC, the Indian tourism industry can create about 40 million jobs by 2019.
Moreover, it has been fulfilling long-lasting socio-economic objectives of Indian economy by
integrating the people at national level and creating international sensitivity. Indian government
has undertaking several financial and fiscal reforms to attract foreign investors. Resulting to

2. these reforms, FDI not only escalated in quantum but its composition has also changed
tremendously. The sectors attracting maximum FDI has been service sector, telecommunication,
computer software, and hotel and tourism among others.
Tourism is one of the core drivers of the economy in India and it is classified in the field
of the service industry. Some of the benefits associated with the tourism industry are:
• It contributes to a decreased rate of unemployment.
• Development of the foreign exchange system.
• Promotion of other economic activities in the country.
India also has a large unexploited potential for foreign tourism (GOI 2001). Foreign
tourism has been steadily increasing in India. In terms of number of tourist arrivals to the country
in the last decade and a half, the number of tourists of foreign nationality visiting India increased
from about 16.8 lakhs in 1991 to about 33.7 lakhs in 2004. According to World Travel and
Tourism Council (2013) Travel and Tourism directly supported 10, 08, 94,000 jobs (3.4 percent
of total employment). This is expecting to rise by 2.0 percent pa to 126,257,000 jobs (3.7 percent
of total employment) in 2014. In India the number of domestic tourist visit during the year 2013
were 1145 million, showing a growth of 9.59 percent over year and the freeing tourist arrivals
during the 2014 were 77.03 lakh with growth rate of 10.6 percent over 2012.
The government of India had been limiting the number of investors who build
infrastructure such as hotels and resorts through different channels of foreign investment such as
FDI (Foreign Direct Investment), M&A (Mergers & Acquisitions), etc. This was a conventional
initiative that was meant to encourage the locals to take the chance to develop them. In the recent
Trade liberalization reforms, the government has encouraged trade by allowing 100 percent
foreign direct investments in tourism. To motivate the investors, the Indian government is
offering five-year tax holiday to hotels, resorts and other foreign investments that encourage
tourism. Most of the companies such as the Hilton, Accor, and Intercontinental hotels are
expected to be major international investors. The reduction of restrictions across country borders
for travel agents, tour operators and the tour guide is a great step that was made in the trade
liberalization. India has been able to access plenty of skilled labor from other nations especially
in tourism industry.
OBJECTIVES AND STRUCTURE OF STUDY
The present study is divided into three sections. First section presents the government
initiatives to promote travel and tourism industry and presents the structure and contribution of
this sector in India and growth of tourism industry after the reform in trade liberalization. The
second section is basically reviewing the growth of tourism industry and boosting employment in
India. And third and final Section explicates the contribution of FDI in travel and tourism sector
and pinpoints the challenges before tourism industry to attract FDI.

3. The main objectives of this paper are:
 Trade Liberalization reforms and positive impact on the tourism sector
 To review the growth of tourism industry and boosting employment in India
METHODOLOGY
This study adopts descriptive approach to carry out the research work and employs
secondary sources to collect data such as World Tourism Organization Reports, World Economic
Forum's Travel and Tourism Competitiveness Report (TTCR), World Travel and Tourism
Council (WTTC)'s research reports, Economic Surveys and Budgets of Government of India.
The collected data is presented in tabular form in absolute form as well as percentages and
explored by calculating ratios and growth rates. The secondary sources include the reports
collected form Ministry of Tourism Government of India (MOTGI), India Tourism Statistics at a
Glance 2014, socio-economic reviews, various articles at state, national and international level
and Reserve Bank of India.
GROWTH OF TOURISM INDUSTRY
Tourism is well known to be a chief contributor to the India’s economy. It contributes to
the economy activity in two major ways: forward and the backward linkages. The backward
linkages are when tourism takes inputs from other industries. These are manufactured items from
the local industries and also the agricultural products. In the forward linkage, it provides direct
inputs in the economy. Both are crucial since they contribute directly to economic growth. Apart
from the contribution for foreign exchange earnings, the importance of tourism industry can be
measured in terms of its contribution to the national income (as measured by the tourism GDP)
and employment. The nature of tourism industry, however, makes estimation of these parameters
difficult. Tourism is a composite sector. It generates income in a large number of activities that
feature as sectors and sub‐sectors in the classificatory scheme of the National Accounts Statistics
(NAS). Important among them are (i) Hotels and other accommodation units; (ii) Restaurants;
(iii) Travel agents and tour operators; (iv) Transport services; (v) Tourist resorts and complexes;
(vi) Entertainment facilities; (vii) Shopping facilities including sales outlets for curios,
handicrafts, souvenirs, etc.; (viii) Conference and Convention facilities; (ix) Adventure and
recreational sports facilities; and (x) Guide services.
Tourism has emerged as one of the largest industries both in terms of gross domestic
product (GDP) and employment in the world today (ESCAP 1999; WTTC 2004b). In 2006
tourism GDP is likely to account for about 10 per cent of world GDP (WTTC 2006). A notable
research done earlier this year on the Indian tourism industry stated that in 2014, tourism
contributed 7.3% of the overall Gross Domestic Product (G.D.P) of India.

4. Table -1 -Growth in Tourism Industry
2013 2014 (% Growth)
Direct Contribution to GDP (USD Billion) 37.2 7.5
Total Contribution to GDP (USD Billion) 113.2 7.3
Visitors Exports (USD Billion) 19.0 4.8
Capital Investment (USD Billion) 33.1 9.8
Direct contribution to employment (‘000 jobs) 223202 2.5
Total contribution to employment (‘000 jobs) 35438.5 2.7
Sources: - Compiled data WTTC Travel and Tourism Economic Impact 2014
Indian government has initiated different schemes such as scheme for integrated
development of tourist circuits through mega projects, scheme for capacity building for service
providers, scheme for large revenue generating projects for investment in tourism infrastructure,
scheme for organizing tourism related events, scheme for promoting rural tourism since 2002
and scheme of 'Visa on Arrival' for tourists since January 2010. The number of Foreign Tourist
Arrivals (FTAs) in India during 2014 increased to 7.68 million as compared to 6.97 million in
2013. The growth rate in FTAs during 2014 over 2013 was 10.2% as compared to 5.9% during
2013 over 2012. The double digit growth of 10.2% in 2014 for India was better than the growth
rate of 4.2% for the International Tourist Arrivals around the world in 2014.Table 2 Explain the
Foreign Tourist arrival details in India.
Table -2 Foreign Tourist Arrivals (FTAs) in India 2001-2014
Year FTAs in Indian (in million)
Percentage (%) change over the
previous year
2001 2.54 4.2
2002 2.38 6
2003 2.73 14.3
2004 3.46 26.8
2005 3.92 13.3
2006 4.45 13.5
2007 5.08 14.3
2008 5.18 4
2009 5.17 2.2
2010 5.78 11.8
2011 6.31 9.2
2012 6.58 4.3
2013 6.97 5.9
2014 7.68 10.2
Sources :- (i) Bureau of Immigration, Government of India for 1998-2014
(ii) Ministry of Tourism, Govt. of India 2001-14

5. Government of India has taken initiatives to promote tourism sector. The Tourist Visa on
Arriva (TVOA) enabled with Electronic Travel Authorization (ETA) scheme on 27/11/2014 for
nationals of 43 countries to travel to India for tourism for a short stay of 30 days. India as signed
51 Bilateral Tripartite Agreements/ MOU/ Protocols with other countries to maintain friendship
and promote cooperation in tourism sector. A New Tourism Policy approved in 2002 in order to
replace the first tourism policy of 1982 considering tourism sector as an engine of growth.
Medical Tourism was included in the purview of the Marketing Development Assistance (MDA)
scheme. Initiatives were taken to promote rural tourism under the United Nations Development
Programme (UNDP). Government allowed 100 per cent foreign investment under the automatic
route to upgrade the hospitality and tourism related industry. A 'Mega Projects' scheme has been
initiated for tourism infrastructure development to build up nationally and internationally
important tourism destinations and circuits. A “Clean India” Campaign has been launched to
make tourist destinations attractive by promoting cleanliness.“Incredible India” and "Atithi Devo
Bhavah" Campaign launched in to promote tourism.
TOURISM AND EMPLOYMENT GENERATION
Nowadays, there is a growing agreement on the positive contribution of tourism in
inclusive and sustainable growth and development of a country. United Nations Conference
agrees that tourism stimulates the local economy in destination countries through supply-chain
linkages with other economic sectors, particularly in agriculture and manufacturing. It promotes
entrepreneurship and the growth of SMEs. Tourism bolsters the diversification of the local
economy and it generates export income. Tourism-related demand for goods and services creates
new jobs, in particular for youth and women, thus contributing to poverty reduction. Tourism
could help generate income for populations in remote and rural areas, thereby reducing
incentives for urban migration.
The recent reforms on trade liberalization have had a positive impact on the tourism
sector. Reforms that were made in 2014 contributed positively by increasing the number of
tourists in India. In 2013, tourism contributed around 5.1% of the GDP and it increased in 2014
to 7.3%. The tourism industry has estimated to get approximately an annual rate of 7.7 percent
increase in the next 10 to 20 years. The number of foreign investors has gradually doubled in
India. Research carried out by the recent Government of India stated that for every USD 1
million invested in India, there are 78 jobs that are created (Make in India, 2015). Table 3
explains the contribution of tourism to total gross domestic Product (GDP) and employment.

6. Table – 3
Contribution of Tourism to Total Gross Domestic Product (GDP) and Employment
Year Contribution of Tourism in GDP of
the Country (%)
Contribution of Tourism in GDP
Employment of the Country (%)
Direct Indirect Total Direct Indirect Total
2009 3.68 3.09 6.77 4.37 5.80 10.17
2010 3.67 3.09 6.76 4.63 6.15 10.78
2011 3.67 3.09 6.76 4.94 6.55 11.49
2013 3.74 3.14 6.88 5.31 7.05 12.36
Sources: Tourism Annual Report 2014-15, Ministry of tourism Government of India
Due to the growing number of tourist arrival for recreational, leisure or business travel in
the country, this sector is contributing more to GDP of India than automotive manufacturing
industry and generating more jobs than the chemical manufacturing, automotive manufacturing,
communications and mining sectors added together (WTTC). The total number of man-days of
employment generated was estimate at 5.50 million in 1990-91 and slowly increased to 24.96
million in 2010-11. The increase was relatively faster since 2003-04, mostly due to the better
initiation of the travel and tourism policy in India.
5.5
8.5 9.1 9.9 10.5 11.5 12.5 13.5 14.5 15.7 17 18.3
24.96
0
5
10
15
20
25
30
Trends in Direct Employment Generation from Travel and
Tourism in India (million)

7. FOREIGN DIRECT INVESTMENT AND TOURISM
The hotel and tourism industry is among the top 10 sectors attracting foreign direct
investment (FDI). According to the Department of Industrial Policy and Promotion (DIPP), this
sector attracted about US$ 7,441.Hotel and Tourism industry is presently occupying 3.28% share
of total FDI equity inflows. Various international hospitality companies such as Hilton, Accor
and the Inter Continental Hotels Group have already announced major venture plans in India,
and hospitality division is expected to see an additional US$ 11.41 billion in inbound
investments over the next two years. MakeMyTrip Ltd is planning to invest US$ 15 million with
a focus on e-tourism in India.
Given the role of Hotel and Tourism industry in Inclusive growth, this sector is declared
as high priority sector for Investment and 100% foreign direct investment (FDI) is permissible in
the sector on the automatic route. This investment is permitted in construction of hotels and other
tourism related projects and operations such as airport expansion projects. The term hotels
include restaurants, beach resorts, and other tourist complexes providing accommodation and/or
catering and food facilities to tourists. Tourism related industry is also broadly defined that
comprises travel agencies, tour operating agencies, tourist transport operating agencies and other
units providing facilities to tourists. In addition, a five year tax holiday is granted to
organizations that set up hotels, resorts and convention centers at specific destinations.
Foreign Exchange Earnings (FEEs) from Tourism in India in terms and in US$ terms
FEEs during the month of December 2015 were `13,253 crore as compared to `12,988
crore in December 2014 and 11,994 crore in December 2013. The FEEs in ` terms during
December 2015 registered a positive growth of 2.0% over December 2014 as compared to
positive growth of 8.3% in December 2014 over December 2013. FEEs from tourism in terms
during January- December 2015 were 1, 26,211 crore with a growth of 2.3% as compared to the
FEE of 1, 23,320 crore with a growth of 14.5% during January- December 2014 over January-
December 2013. FEEs in US$ terms during the month of December 2015 were US$ 1.991 billion
as compared to FEEs of US$ 2.069 billion during the month of December 2014 and US$ 1.936
billion in December 2013. The FEEs in US$ billion in December 2015 registered a decline of
3.8% over December 2014 as compared to positive growth of 6.9% in December 2014 over
December 2013. FEEs from tourism in US$ terms during January- December 2015 were US$
19.676 billion with a negative growth of 2.8% as compared to the US$ 20.236 billion with a
positive growth of 9.7% during January- December 2014 over January- December 2013.

8. Table - 4
Foreign Exchange Earning (FEEs) in US $ million from Tourism in India, 2001-2014
Year
(FEEs) from Tourism in India in
US $ million
Percentage (%) change over the previous
year
2001 3198 4.2
2002 3103 6
2003 4463 14.3
2004 6170 26.8
2005 7493 13.3
2006 8634 13.5
2007 10729 14.3
2008 11832 4
2009 11136 2.2
2010 14193 11.8
2011 16564 9.2
2012 17777 4.3
2013 # 1 18445 5.9
2014 # 1 20236 10.2
# 1 Provisionally Revisedbasedon final FTA received from BOI
Sources :- (i) RBI for 1998 to 2010
(ii) Ministry of Tourism, Govt. of India f04 2001-14
0
5000
10000
15000
20000
25000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013#1
2014#1
FEEs from Touris
in US $ million
Year
(FEEs) from Tourism in India inUS $ million
(FEEs) from Tourism in India in US
$ million

9. CHANLLENGES TO ATTRACT FDI IN TOURISM
Multiple tax structure: Tax structure of India is plaguing with multiplicity of taxes and highest
among all Asia Pacific countries. There is a provision of Expenditure Tax on Hotels at central
level while Luxury Tax on hotels at state level. Given this multiple tax structure some
international hotel chains are hesitating to initiate their business in India.
Highest tax structure: India, with 33.99% rate of corporate tax, is one among twenty countries
in the world who have highest top marginal Corporate Tax Rates. High taxes structure leads to
high cost of tourism in the country which is a reason of low competitive position of India.
Service tax on travel intermediaries: Travel intermediaries can be tour operators (wholesalers)
and travel agencies (retailers). These intermediaries provides a wide range of services to tourists
starting from booking of tickets to arrangements of boarding and lodging, transportation, sight-
seeing and guiding services.
Diffusion of technology in tourism: E-Tourism is low in India due to lack of easy reach and
high cost of technology. People are lacking in necessary e-skills and unaware of e-tourism
benefits.
Skilled human resource: By 2022, there is an additional requirement of 2.7 million employees
for the tourism sector along with requirements of 2.8 million for restaurants, 4.1 million for
hotels and 0.3 million for the travel trade segment (NSDC study). It is a challenging task to cater
this demand of employable human resource and to impart the required skills and knowledge
among the aspirants.
CONCLUSIONS AND POLICY IMPLICATIONS
Tourism sector has made impressive strides in past two decades of trade reforms regime and
its role in Indian economy is increasing. Government has initiated different schemes and policy
measures to promote this sector and to earn foreign receipts. There are many emerging tourism
areas such as Eco Tourism, Cultural Tourism, Agri-Tourism, Healthcare Tourism, MICE
Tourism, Cruise Tourism and Adventure Tourism which can attract FDI and contribute for
Inclusive growth. Some areas of concerns for policy makers are:
 Ease in business regulatory framework, simplified tax procedures, easy availability of
finance at concessional rates, single window clearing system and implementation of
electronic data interchange systems is required to attract foreign investment in the
tourism sector.
 Tourism should be declared as export industry so that benefit of export promotion
policies and exemptions related to foreign exchange earnings could be taken. The long
lasting demand of hotel industry regarding conferring infrastructure status should be
addressed.
 To tap the vast potential of tourism sector, convergence of various ministries and
departments such as Ministry of Tourism, Ministry of Aviation, Ministry of Shipping,

10. government authorities and other related agencies along with world-class infrastructure is
needed.
 India is having good air transport and ground transport infrastructure but quality of roads
(85th) and of ports (79th) requires further improvement. Policy makers should focus on
creating tourism infrastructure such as hotels, ATMs, number of tour operators in the
economy.
 There is a need to improve healthcare infrastructure in India in the line of international
standards.
 According to the TTCR (2013), India's policy environment is somewhat distorted along
with huge cost and time requirement for conducting a business. To overcome from these
barriers Ministry of Tourism coherence among various government policies related to
tourism, an appropriate regulatory framework and specific guidelines for industry is need
of the hour.
 To harness the full potential of Eco, Cultural, and Agri tourism, development of clusters
around the crucial tourist sites along with participation of local bodies and panchayats in
the development of tourism in their region is necessary.
 Government has declared adventure tourism as a product and providing different
incentives for its growth, yet integrated efforts by government and local bodies are
required to provide a safe and long-lasting experience to tourists for the long-term growth
of this sector.
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