What determines international tourist arrivals in India?

ABSTRACT

Using data for 18 major tourist originating countries to India from 2001 to 2015, this study examines the major determinants of international tourist arrivals in India. The results indicate that past experiences of the tourists, per capita income in the tourist originating country, relative costs of living between India and the country of origin, and the level of infrastructure development in India are key determinants of international tourist arrivals in India. Furthermore, both transportation and communication infrastructure are important in attracting tourists to India. In particular, evidence suggests that availability of road and air network and telephone connections has favourable impacts on international tourist arrivals in India. These results are robust to the inclusion of additional variables. These results have important policy implications.

KEYWORDS:

• International tourist arrivals
• panel data
• generalized method of moments (GMM)
• transportation infrastructure
• ICT infrastructure
• teledensity
• India

JEL CLASSIFICATIONS:

• Z30
• C23

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Representative studies in this literature include Akis (1998), Munoz and Amaral (2000), Tan et al. (2002), Eilat and Einav (2004), Dhariwal (2005), Khadaroo and Seetanah (2007, 2008), Cho (2010), Song, Li, Witt, and Fei (2010), Yang et al. (2010), Fourie and Santana-Gallego (2013), Massidda and Etzo (2012), Fourie and Santana-Gallego (2011, 2013), Su and Lin (2014), Chi (2015), Martins, Gan, and Lopes (2017), Dogru et al. (2017), and Ghaderi et al. (2017). These are empirical studies that focus either on a single country or on a group of countries covering different sample periods.

2 This growth rate is calculated based on information available from India Tourism Statistics (ITS), 2017, Ministry of Tourism, Government of India. Note that there has been significant growth in domestic tourism as well. According to ITS (2017), the domestic tourist visits in India increased from about 220 million in 2000 to more than 1.6 billion registering an average annual growth rate of more than 13%.

3 Note that the index is not a measure of a country attractiveness as a tourist destination rather a measurement of the factors that make it attractive to develop business in the travel and tourism industry of individual countries.

4 In a recent study, Tiwari et al. (2018) apply time series technique to tourist arrival data from 17 major origin countries for the sample period 1981–2012 to show that while a shock to tourist arrivals in India is temporary for a group of 8 countries, it is of permanent nature for the remaining 9 countries. They use these results to argue that the government should focus on long-term solutions to the problems facing the international tourism sector in India. Mohapatra (2018) further examines the causal relationship between tourism and economic growth for a panel of SAARC (South Asian Association for Regional Cooperation) countries over a 20-year period (1995–2014). The author finds evidence of bidirectional causality between tourism expenditures and growth and of unidirectional causality running from tourism receipts to economic growth. Surprisingly, the study finds evidence of a negative effect of tourism expenditures on economic growth. Furthermore, Solarin (2018) examines the tourism-led growth hypothesis for Mauritius. For the overall tourism market, the study finds evidence in support of the tourism-led economic growth hypothesis. However, the study could not find similar evidence across dis aggregated markets.

5 Dhariwal (2005) examines determinants of international tourist arrivals in India using annual data from 1966 to 2000. The primary focus of the study was on the effect of socio political factors on international tourist arrivals in India.

6 For detailed discussion see Dogru et al. (2017).

7 An example is a study by Naude and Saayman (2005) that reports a significant positive effect of number of Internet users on the tourist flows.

8 National Tourism Policy (1982).

9 National Action Plan for Tourism (1992).

10 A list of sample countries is included in the Appendix (Table A1).

11 We follow the definition provided by International Telecommunication Union (ITU).

12 Road and rail line availability per square kilometre instead of per person are used as the geographical coverage of road and rail network is deemed to be more relevant from a tourist point of view.

13 Correlation coefficients between the infrastructure variables and their summary statistics are presented in Appendix (Table A2 and Table A3).

14 Several studies (e.g. Khalil et al., 2007; Narayan, Narayan, Prasad, & Prasad, 2010; Sequeira & Nunes, 2008; Tugcu, 2014) – some focusing on a single country and others considering a group of countries – find empirical evidence of a positive impact of tourism on the overall economic growth.

15 We use number of overall crimes reported as a proxy to capture security and safely in India. Crimes targeted against foreign tourists instead of overall crime could be a better proxy for safety and security at the destination from the tourist’s point of view. But National Crime Records Bureau, Government of India, has started collecting data on crime against foreign tourists only since 2014 (http://pib.nic.in/newsite/PrintRelease.aspx?relid=137584 as on April 5, 2018). Therefore, we use total number of crimes reported in our study.

16 Data on the number of hotel rooms is not available for 2001. Therefore, the average value of the remaining sample years is used for that year.