Is tourism expansion the key to economic growth in India? An aggregate-level time series analysis

• Published in: Annals of tourism research empirical insights Vol. 5; no. 2; p. 100126
• Main Authors: Singh, Deepti, Alam, Qamar
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-11-2024; Elsevier
• Subjects: Granger causality; India; Johansen cointegration; Time series; Tourism led economic growth; VECM model; Tourism led economic growth; VECM model; Johansen cointegration; Granger causality; Time series; India
• ISSN: 2666-9579; 2666-9579
• DOI: 10.1016/j.annale.2024.100126

The paper aims to probe the tourism-economic growth nexus in the case of India. The paper incorporates a more structural view of sector-specific macroeconomic variables like central government expenditure on tourism (CGET), investment in the tourism industry (IOT), foreign tourist arrivals, and foreign tourist visits as explanatory parameters. Johansen's cointegration and error correction model results support the long-run relationship among the variables. All the independent variables are unidirectional causal on GDP except investment in tourism, which shows long-run bidirectional causality. Thus, the long-run unidirectional tourism-led growth hypothesis is supported. The empirical implications support government and private sector-based resource allocation towards tourism expansion, thereby escalating the country's economic growth.
•Tourism acts as a promising sector of economic growth in India over a long period.•Government expenditure on the tourism sector brings hope with better outcomes.•Foreign touristsarrivals and visits do not support any nexus between tourism and economic growth.•Government tourism expenditure and Private Investment in tourism validate the tourism-led growth hypothesis.•Higher Investment in the tourism industry may lead to a higher contribution towards GDP.