Volume VII, Issue 4(16) Winter 2016

ASERS

J ournal of Environmental Management

and Tourism

Quarterly
Volume IX
Issue 6(30)
Fall 2018
ISSN 2068 – 7729
Journal DOI
http://dx.doi.org/10.14505/jemt
 Fall 2018
Journal of Environmental Management and Tourism
Volume IX
Issue 6(30)

Editor in Chief
Ramona PÎRVU
Table of Contents:
University of Craiova, Romania

Editorial Advisory Board

Forecasting the Foreign Tourist Arrivals to Vietnam Using the Autoregressive
Omran Abdelnaser 1 Integrated Moving Average Method 1135
University Sains Malaysia, Malaysia Le Thanh TUNG
Huong Ha A Study on the Implication of Tourism Destination and Customer Satisfaction-
University of Newcastle, Singapore, Based Sustainable Cultural and Heritage Tourism on Tourists Retention in Nias
Australia 2 Island-Indonesia 1145
Harjeet Kaur Victorinus LAOLI, Fatolosa HULU , Desman Serius NAZARA, Eduar BAENE,
HELP University College, Malaysia Sukaaro WARUWU, Yupiter MENDROFA
Janusz Grabara Digital Tourism in the Development of the Arctic Region
3 1154
Czestochowa University of Technology, Marina L. BELONOZHKO, Lydia N. BELONOZHKO, Svetlana S. SITEVA
Poland The Effects of Service Quality, Competitive Prices and Product Quality on
Vicky Katsoni 4 Customer Satisfaction 1165
Techonological Educational Institute of FEBRYANTO, Innocentius BERNARTO
Athens, Greece
Sebastian Kot
Development of Tourist Village Based on Local Wisdom
5 1172
Czestochowa University of Technology, Neneng KOMARIAH, Encang SAEPUDIN
The Institute of Logistics and International
The Hotel Sector as an Important Component of Regional Economic
Management, Poland
Infrastructure
Nodar Lekishvili 6 1178
Elena Yurievna NIKOLSKAYA, Olga Vladimirovna PASKO, Elena Nikolaevna
Tibilisi State University, Georgia ANIKINA, Galina Maxovna DEKHTYAR, Konstantin Anatol'evich LEBEDEV
Andreea Marin-Pantelescu Cross-Functional Training of Front Line Hotel Employees, In-Role and Extra-
Academy of Economic Studies Bucharest, Role Job Performance, Customer Satisfaction, and Customer Loyalty: A
Romania 7 1183
conceptual Model Proposal
Piotr Misztal Ksenia A. SUMANEEVA, Kayode Kolawole ELUWOLE, Turgay AVCI
The Jan Kochanowski University in
Kielce, Faculty of Management and Empirics of Tourism-Led Growth in India, 1995 to 2016
8 1190
Administration, Poland Himanshu B. ROUT, P. K. MISHRA, B. B. PRADHAN
Agnieszka Mrozik
Faculty of Biology and Environmental Current Issues of Inbound Tourism in the Republic of Kazakhstan and Ways of
protection, University of Silesia, Katowice, 9 Promotion 1202
Poland Sayat AYETOV, Nazym URUZBAYEVA
Chuen-Chee Pek The Analysis of Network Actors in the Policy Implementation of Developing
Nottingham University Business School, 10 Tourism in Semarang City 1211
Malaysia Tri YUNININGSIH, Sri SUWITRI, KISMARTINI, Etty SOESILOWATI
Roberta De Santis The Main Problems and Directions of the Effective Development Tourism
LUISS University, Italy
11 Zhassulan SADYKOV, Madina ABDIKARIMOVA, Ainur GABDULINA, 1220
Fabio Gaetano Santeramo Aigerim MAKHASHEVA, Rimma TAKHTAEVA, Armanay SAVANCHIYEVA
University of Foggia, Italy
Dan Selişteanu Dolgaya Spit: Tourism on the Azov Seacoast
12 1229
University of Craiova, Romania Tatiana Aleksandrovna VOLKOVA
Laura Ungureanu
Spiru Haret University, Romania
 Fall 2018
Volume IX
Issue 6(30)
Development of Community Network for Sustainable Tourism based on the
1237
Editor in Chief 13 Green Economy Concept
Ramona PÎRVU Wisakha PHOOCHINDA
University of Craiova, Romania Methodology for Assessing the Consumption of Tourism Services in Regional
Markets 1245
Editorial Advisory Board 14
Olga V. CHUMAKOVA
Omran Abdelnaser Information Support Model for the Children’s Leisure and Tourism Industry
University Sains Malaysia, Malaysia within the Annual Planning Cycle
Dmitry Valerievich FEDYUNIN, Valery Vasilyevich BEZPALOV, 1257
Huong Ha 15
University of Newcastle, Singapore, Sergey Alexandrovich LOCHAN, Vera Viktorovna GOLOVINA,
Australia Andrey Viktorovich IVANOV
Harjeet Kaur Current State and Prospects of Russian Outbound Tourism
1264
HELP University College, Malaysia 16 Dmitry Aleksandrovich KOZLOV
Janusz Grabara Effectiveness of Knowledge Management (KM) on Customer Relationship
Czestochowa University of Technology, Management (CRM) in Hotel Business Performance 1277
Poland 17
Sanjiv Kumar SRIVASTAVA, Bibhas CHANDRA, Anand Prasad SINHA
Vicky Katsoni The Way to the Leading Positions in World Tourism: Case Study of Kazakhstan
Techonological Educational Institute of Gulbaram A. KULAKHMETOVA, Oksana D. HNATKOVYCH, Alla V. RUSNAK, 1289
Athens, Greece 18
Nadiia A. SHCHERBAKOVA
Sebastian Kot
Czestochowa University of Technology, Halal Tourism Destination Development Model
1296
The Institute of Logistics and International 19 Meizar RUSLI, Riza FIRMANSYAH, Yustisia Pasfatima MBULU
Management, Poland
An Empirical Study on Tourism Potentiality of Manipur
Nodar Lekishvili 1303
20 Lonashree SANASAM, Bibhutibhushan PRADHAN, Sasmita MOHANTY
Tibilisi State University, Georgia
Rural Tourism as One of the Priority Factors for Sustainable Development of
Andreea Marin-Pantelescu
Academy of Economic Studies Bucharest, Rural Territories in Kazakhstan 1312
21
Romania Aitolkyn TLEUBAYEVA
Prospects for the Development of Green Business in the Agro-Industrial
Piotr Misztal
Complex
The Jan Kochanowski University in 1327
Kielce, Faculty of Management and 22 Botagoz BOLATBEK, Rassima SALIMBAYEVA, Gulbarshyn SATBAEVA,
Administration, Poland Kulshat SAPARALIYEVA, Saltanat USSUBALIYEVA
Strategic Conditions for Effective Management of Workers’ Competitiveness in
Agnieszka Mrozik
Faculty of Biology and Environmental the Agro-Food Sector of the Russian Federation
protection, University of Silesia, Katowice, 23 Vera Nikolayevna RUBTSOVA, Sergey Anatolevich ANDRYUSHCHENKО, 1335
Poland Irina Viktorovna SHARIKOVA, Artem Viktorovich SHARIKOV,
Chuen-Chee Pek Tatyana Vladimirovna GOVORUNOVA
Nottingham University Business School, Leasing and Insurance Mechanism in Sustainable Agricultural Development
Malaysia 24 Baglan AIMURZINA, Mazken KAMENOVA, Ainura OMAROVA, Roza SHOKHAN, 1342
Roberta De Santis Ainur KARIPOVA, Aizhan KHOICH
LUISS University, Italy Entrepreneurship in Tourism Sector in Central European Country: Hospitality
25 Trends in the Czech Republic in 2007 - 2016 1351
Fabio Gaetano Santeramo
University of Foggia, Italy Ladislav MURA, Patrik KAJZAR
Dan Selişteanu
University of Craiova, Romania
Laura Ungureanu
Spiru Haret University, Romania
 Call for Papers
Winter Issues 2018
Journal of Environmental Management and Tourism

Journal of Environmental Management and Tourism

Journal of Environmental Management and Tourism is an interdisciplinary research journal,

aimed to publish articles and original research papers that should contribute to the development of both
experimental and theoretical nature in the field of Environmental Management and Tourism Sciences.
Journal will publish original research and seeks to cover a wide range of topics regarding
environmental management and engineering, environmental management and health, environmental
chemistry, environmental protection technologies (water, air, soil), pollution reduction at source and waste
minimization, energy and environment, modeling, simulation and optimization for environmental
protection; environmental biotechnology, environmental education and sustainable development,
environmental strategies and policies, etc. This topic may include the fields indicated above, but are not
limited to these.
Authors are encouraged to submit high quality, original works that discuss the latest developments
in environmental management research and application with the certain scope to share experiences and
research findings and to stimulate more ideas and useful insights regarding current best-practices and
future directions in environmental management.
Journal of Environmental Management and Tourism is indexed in SCOPUS, RePEC, CEEOL,
ProQuest, EBSCO and Cabell Directory databases.
All the papers will be first considered by the Editors for general relevance, originality and
significance. If accepted for review, papers will then be subject to double blind peer review.

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Expected publication date: December 2018
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To prepare your paper for submission, please see full author guidelines in the following file:
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Volume IX, Issue 6(30) Fall 2018

DOI : http://dx.doi.org/10.14505/jemt.v9.6(30).08
DOI: https://doi.org/10.14505/jemt.v8.3(19).01

Empirics of Tourism-Led Growth in India, 1995 to 2016

Himanshu B. ROUT
Siksha ‘O’ Anusandhan University, India
himanshurout@soa.ac.in
P. K. MISHRA
Central University of Punjab, India
pkmishra1974@gmail.com
B. B. PRADHAN
Siksha ‘O’ Anusandhan University, India
registrar@soauniversity.ac.in

Suggested Citation:
Rout, H.B., Mishra, P.K., Pradhan, B.B. (2018). Empirics of Tourism-Led Growth in India, 1995 to 2016. Journal of Environmental
Management and Tourism, (Volume IX, Fall), 6(30): 1190-1201. DOI:10.14505/jemt.v9.6(30).08
Article’s History:
Received July 2018; Revised August 2018; Accepted September 2018.
2018. ASERS Publishing. All rights reserved.
Abstract:
In the globalized world, the travel and tourism have been considered crucial for achieving inclusive growth, especially in less developed
economies. It has been increasingly recognised as a good contributor to national income and employment. So it can be used an instrument
for achieving a higher rate of economic growth of a country in the long-run. In this line of argument, this paper examined the causal
relationship between tourism and economic growth in the context of Indian States/UTs in a panel data framework. The empirical findings
support the tourism-led growth hypothesis in the long-run and growth-led tourism hypothesis in the short-run. Thus, the policy choice is to
make the tourism instrumental, through its promotional strategies, for the inclusive and sustainable development of India.
Keywords: tourism; economic growth; panel estimation; India.
JEL Classification: L83; Z32; Z39.
Introduction
In recent decades, it has been the consensus among the academician, researchers and policy makers that the smokeless
industry, tourism has been strengthened to a great extent to generate positive contributions to the socio-economic, cultural
and political development of a nation, and also the sector has been applauded to create strong bonds of harmonious
international and inter-regional relationships for peace and prosperity (Richardson 2010; Gill and Singh 2011; Gill and Singh
2013; Rout et al. 2016a; Mishra and Verma 2017; Mishra et al. 2018; Sharma 2018). The development of tourism has usually
been considered a positive contribution to economic growth (Mishra et al. 2016; Rout et al. 2016b; Rout et al. 2016c). The
growth of tourism leads to an increase in household income and government revenues through multiplier effects,
improvements in the balance of payments and growth in the number of tourism-promoted government policies (Khan et al.
1995; Lee and Kwon 1995; Lim 1987; Oh 2005; Vita and Kyaw 2016; Kaur and Kansra 2018).
Furthermore, tourism promotes economic growth by stimulating investment and production in the economy (Gimeno
1988; Ayres 2000; Oh 2005; Belloumi 2010); increasing competitive efficiency of local firms (Balaguer and Contavella-Jorda
2002); reducing unemployment (Brida and Pulina 2010); earning foreign exchange for financing the import of capital goods
(Mckinnan 1964); reducing cost of production of local business entrepreneurs (Andrioties 2002; Croes 2006); attracting foreign
direct investment (Soukiazis amd Proença 2008; Cortés-Jiménez 2008); promoting women’s participation in the labour market
and enabling society’s most vulnerable groups to take part in the production of goods and services (Ayres, 2000; Brau et al.
2003; Sequeira and Campos 2005; Croes and Vanegas 2008); and lastly by promoting social cohesion and lowering social
tension (Llorca-Rodríguez et al. 2016).

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Thus, tourism has been looked upon as one of the economic sectors best able to address the issues of spreading the
benefits of inclusive and sustainable growth by creating jobs and raising living standards of poor people (Ashley 2007; Mishra
et al. 2011; Pleumarom 2012; Mishra and Rout 2012-13; Munshi and Mishra 2016). Therefore, travel and tourism have been
well considered as a significant service sector which can be regarded as a major source of economic growth and development.
1. Literature Review
Keeping in view the positive impacts of tourism on economic growth, many researchers have investigated the dynamics of the
relationship between tourism sector development and economic growth. Knowledge of this relationship is of particular
importance to policy makers as tourism policies are becoming major concerns for less developed countries. The tourism
literature interprets this causal link in four ways: tourism-led growth hypothesis which holds that growth of tourism leads to
economic growth; growth-led tourism hypothesis which presumes that economic growth leads to the development of tourism;
feedback hypothesis which believes on a bidirectional causal relationship between tourism and economic growth; and
neutrality hypothesis which predicts no causal relationship between tourism and economic growth. These hypotheses have
been tested empirically both in the context of a specific country, or in multi-country cases.
For example, Balaguer and Cantavella-Jorda (2002) for Spain; Tosun (1999), Gunduz and Hatemi (2005) and Zortuk
(2009) for Turkey; Durbarry (2002) for Mauritius; Dritsakis (2004) for Greece; Oh (2005) for Korea; Wickremasinghe and
Ihalanayake (2006) for Sri Lanka; Chen and Chiou-Wei (2009) for Taiwan; Kreishan (2010) and Aliqah and Al-rfou' (2010) for
Jordan; Mishra et al. (2011), Ohlan (2017) and Sharma (2018) for India; Surugiu and Surugiu (2013) for Romania; Eeckels et
al. (2012) for Greece; Tang and Tan (2015) for Malaysia; Eugenio-Martin et al. (2004) for low-income Latin American
Countries; Lee and Chang (2008) for OECD Nations; Lanza et al. (2003) for 13 OECD Countries; Skerritt and Huybers (2005)
for 37 developing countries; Fayissa et al. (2007) for 42 Sub-Saharan African countries; Fayissa et al. (2009) for 17 Latin
American countries; Chou (2013) for Cyprus, Latvia and Slovakia out of 10 transition countries; Narayan et al. (2013) for
Pacific Island countries Seghir et al. (2015) for 49 selected countries; Kum et al. (2015) for N-11 countries; Dritsakis (2012),
Demirhan (2016) for Mediterranean countries and Shakouri et al. (2017) for Iran found the evidence in favour of the tourism-
led growth hypothesis. In these studies, tourism sector development has been observed to promote the macroeconomic
growth of countries.
Similarly, Khalil et al. (2007) for Pakistan; Chou (2013) for Czech Republic and Poland out of 10 transition countries,
and Phouphet (2018) for Laos found the evidence in favour of growth-led tourism hypothesis. Certain studies also document
the evidence in favour of feedback hypothesis, e.g., Kim et al. (2006) for Taiwan; Chen and Chiou-Wei (2009) for South Korea;
Lee and Chang (2008) for non-OECD countries; Seetanah (2011) for Island economies; and Chou (2013) for Estonia and
Hungary out of 10 transition countries. Contrary to this, Tang and Jang (2009) for United States; Katircioglu (2009) for Turkey;
Chou (2013) for Bulgaria, Romania and Slovenia out of 10 transition countries; and Du et al. (2016) for 109 countries observed
that investment in tourism is an insufficient determinant of economic growth which favours neutrality hypothesis. Cardenas-
Garcia et al. (2015), in a sample of 144 countries, found the evidence of tourism-led growth hypothesis in case of developed
countries and not in the least developed and/or developing countries.
Regardless of numerous studies that have been conducted over time and space to examine the nexus between tourism
and economic growth, the issue still remains controversial. Recent literature suggests that, the stability of tourism and
economic growth relationship changes over time (Lean and Tang 2010; Arslanturk et al. 2011; Antonakakis et al. 2014). Chiu
and Yeh (2016) contended that countries with different conditions of tourism development experience various impacts on the
tourism-growth nexus. In spite of such findings, tourism is considered not only important at global and national levels, but
equally important for its growth-enhancing role in small states or provinces of a nation. And, the case of India is no exception.
Therefore, the very objective of this piece of research work is to examine the dynamics of the relationship between tourism
sector development and economic growth in India.
2. Indian Tourism Industry
India is a nation having heterogeneous economic conditions and socio-cultural backgrounds across her States/UTs; still the
tourism sector is considered strategic for the socio-economic development of her States/UTs. As per an estimate by the
Planning Commission (currently NITI Aayog), for every million rupees invested in the tourism sector, 89 jobs are created
against 45 jobs in the primary sector and 13 jobs in the secondary sector. The ratio of indirect jobs to direct jobs in the tourism
sector is approximately 3:1 (Das 2013). In India, the tourism helps to generate about 5 million jobs every year (Sahu 2013;
Batta 2000); gives local handicrafts business turnover of INR 10 billion a year (Sahu 2013; Suba and Selvachantra 2014); the
total income from this smokeless industry is around INR 200 billion (Sahu 2013; Suba and Selvachantra 2014); and the regions
like Aurangabad in Maharashtra, Khajuraho in Madhya Pradesh, Jammu and Kashmir, and Raghurajpur in Odisha have
emerged with the help of tourism only (Mishra and Rout 2012).
As per the estimations by the Bureau of Immigration, Government of India, the foreign tourist arrivals in India in 2017
was 10.04 million (14% increase over the last year) and between Jan-June 2018, it was 5.16 million. The shares of India in
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international tourist arrivals in world and Asia and the Pacific region in 2017 were 1.17% (1323 million) and 4.81% (323.2
million) respectively. In respect to this, India has 16th rank in the World and 7th in the Asia and the Pacific region in 2017. The
top 5 source countries for foreign tourist arrivals in India in 2017 are Bangladesh (21.49%), United Nations (13.72%), United
Kingdom (9.83%), Canada (3.34%) and Australia (3.23%). As per the estimations by the Ministry of Tourism, Government of
India, the foreign exchange earnings from tourism in India in 2017 was US$ 27.310 billion and between Jan-June 2018, it was
US$ 14.625 billion. All these signify the importance of India’s tourism potential to influence the macroeconomic growth of the
country.
Not only foreign tourist arrivals, but the potential of domestic tourist visits across Indian States are also significant in
bringing out positive impacts on the growth of tourism sector and the country as a whole. As per the compilations of the
Ministry of Tourism, Government of India, 1,652.49 million domestic tourist arrivals took place in India in 2017 which is about
2.3% increase over the previous year. The top 5 States which contributed to such a growth in domestic tourism are Tamil
Nadu (20.9%), Uttar Pradesh (14.2%), Karnataka (10.9%), Andhra Pradesh (10.0%) and Maharashtra (7.2%). India, because
of its rich social traditions, cultural heritage, spiritual footprints, colorful fairs & festivals, and natural beauties offer a wide range
of tourism products including heritage tourism, spiritual tourism, eco-tourism, adventure tourism, science tourism, rural
tourism, agri-tourism and medical tourism which attract tourist’s arrivals both from within and outside the country.
Table 1. Domestic Tourist Arrivals to Indian States/UTs, 2012 to 2016
Indian States/UTs 2012 2013 2014 2015 2016
Andaman & Nicobar Islands 238,699 243,703 285,146 296,684 384,552
Arunachal Pradesh 132,243 125,461 180,964 352,067 385,875
Assam 4,511,407 4,684,527 4,826,702 5,491,845 5,160,599
Chandigarh 924,589 936,922 1,061,419 1,073,842 1,182,504
Delhi 18,495,139 20,215,187 22,626,859 25,258,051 28,460,832
Goa 2,337,499 2,629,151 3,544,634 4,756,422 5,650,061
Gujarat 24,379,023 27,412,517 30,912,043 36,288,463 42,252,909
Haryana 6,799,242 7,128,027 13,442,944 7,395,496 7,382,995
Himachal Pradesh 15,646,048 14,715,586 15,924,701 17,125,045 17,997,750
Jammu & Kashmir 12,427,122 13,642,402 9,438,544 9,145,016 9,414,579
Karnataka 94,052,729 98,010,140 118,283,220 119,863,942 129,762,600
Kerala 10,076,854 10,857,811 11,695,411 12,465,571 13,172,536
Maharashtra 74,816,051 82,700,556 94,127,124 103,403,934 116,515,801
Manipur 134,541 140,673 115,499 146,169 150,638
Meghalaya 680,254 691,269 716,469 751,165 830,887
Nagaland 35,915 35,638 58,413 64,616 58,178
Odisha 9,052,871 9,800,135 10,790,622 11,786,117 12,842,766
Puducherry 981,714 1,000,277 1,188,093 1,297,192 1,398,289
Punjab 19,056,143 21,340,888 24,271,302 25,796,361 38,703,326
Rajasthan 28,611,831 30,298,150 33,076,491 35,187,573 41,495,115
Sikkim 558,538 576,749 562,418 705,023 747,343
Tamil Nadu 184,136,840 244,232,487 327,555,233 333,459,047 343,812,413
Tripura 361,786 359,586 361,247 363,172 370,618
West Bengal 22,730,205 25,547,300 49,029,590 70,193,450 74,460,250
Source: Tourism Statistics, Ministry of Tourism, Government of India
The Table 1 presents the number of domestic tourist arrivals to the mentioned 24 States/UTs of India from 2012 to
2016. It is revealed that the domestic tourist arrivals to the various States of India have increased in past years. Similarly,
Table 2 depicts the number of foreign tourist arrivals to the different States of India. The number of foreign tourist arrivals has
also been increased in most of the States. This increase in tourist arrivals is always positively interpreted by the researchers
when the contributions to the socio-economic development are concerned. In view of this importance of tourism in India and
for her States, it is highly imperative to examine the nexus between tourism and economic growth.
When we reviewed the tourism literature, we found only a single study, i.e., Mallick et al. (2016) which has addressed
this issue in the context of the Indian States. Mallick et al. examined the issue in the context of 23 selected Indian States
during 1997 to 2011 using panel ARDL model and found the evidence in favour of the statistically significant relationship
between tourism and economic growth in the long-run, but not in the short-run. However, given the presence of unavoidable
heterogeneous socio-economic, infrastructural, cultural, and political conditions of Indian States, the tourism-growth nexus
can better be captured through the Pedroni (1999, 2000, 2004) panel cointegration estimation, and the estimation of panel
vector error correction model as suggested by Engle and Granger (1987). This panel causality method can control for
dependency and State-specific characteristics across the Indian States.

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Table 2. Foreign Tourist Arrivals to Indian States/UTs, 2012 to 2016

Indian States/UTs 2012 2013 2014 2015 2016
Andaman & Nicobar Islands 17,538 14,742 17,235 14,674 15,466
Arunachal Pradesh 5,135 10,846 5,204 5,705 6,598
Assam 17,543 17,638 21,537 24,720 12,685
Chandigarh 34,130 40,124 28,365 29,538 31,549
Delhi 2,345,980 2,301,395 2,319,046 2,379,169 2,520,083
Goa 450,530 492,322 513,592 541,480 680,683
Gujarat 174,150 198,773 235,524 284,973 343,752
Haryana 233,002 228,200 547,367 303,118 331,291
Himachal Pradesh 500,284 414,249 389,699 406,108 452,770
Jammu & Kashmir 78,802 60,845 86,477 58,568 63,207
Karnataka 595,359 636,378 561,870 636,502 461,752
Kerala 793,696 858,143 923,366 977,479 1,038,419
Maharashtra 2,651,889 4,156,343 4,389,098 4,408,916 4,670,049
Manipur 749 1,908 2,769 3,260 3,064
Meghalaya 5,313 6,773 8,664 8,027 8,476
Nagaland 2,489 3,304 3,679 2,769 3,260
Odisha 64,719 66,675 71,426 66,971 76,361
Puducherry 52,931 42,624 83,291 106,153 117,437
Punjab 143,805 204,074 255,449 242,367 659,736
Rajasthan 1,451,370 1,437,162 1,525,574 1,475,311 1,513,729
Sikkim 26,489 31,698 49,175 38,479 66,012
Tamil Nadu 3,561,740 3,990,490 4,657,630 4,684,707 4,721,978
Tripura 7,840 11,853 26,688 34,886 36,780
West Bengal 1,219,610 1,245,230 1,375,740 1,489,500 1,528,700
Source: Tourism Statistics, Ministry of Tourism, Government of India

Therefore, in an attempt to make the methodological improvement, this paper aims to re-examine the dynamics of the
relationship between tourism and economic growth in India in a balanced panel framework of 24 States/UTs during 1995 to
2016one.
3. Data and Methodology
The objective of this study is to investigate the dynamic nexus between tourism and economic growth in India in a balanced
panel framework of 24 States/UTs over the sample period spanning from 1995 to 2016. Thus, depending on whether tourism
leads to economic growth or the other way around, we suggest the following theoretical model to be estimated in a panel
framework: EG  f  DTA, FTA  where EG stands for real economic growth measured by Gross State Domestic Product
at 2004-05 prices; DTA stands for the number of domestic tourist arrivals to States/UTs; and FTA is the number of foreign
tourist arrivals in States/UTs. Assuming the log-linear relationship between these variables, the estimated form of this model
is:
ln( EG)it  i  1i ln( DTA)it  2i ln( FTA)it   it
Here, i is the State/UT of India and t is the time period. If tourism sector development is hypothesized to contribute to
economic growth, then the expected signs of the coefficients 1i and  2i are positive. The parameter  i depicts the State/UT
specific fixed effects, and  it denotes the estimated residuals which represent the deviations from the long-run relationship.
This model was estimated using a balanced panel dataset of 24 States/UTs of India, i.e., Andaman and Nicober Islands,
Arunachal Pradesh, Assam, Chandigarh, Delhi, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka,
Kerala, Maharashtra, Manipur, Meghalaya, Nagaland, Odisha, Puducherry, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura
and West Bengal over the from 1995 to 2016. All required data were collected from the India tourism statistics published by
Ministry of Tourism, Govt. of India, and CMIE. In order to reduce the heterogeneity of the data among the selected States/UTs,
we expressed the variables in their natural logarithms. Thus, the variables become ln(EG), ln(DTA) and ln(FTA). The
estimation of the model has been performed in four steps.
Step-I: Panel Unit Root Test: In this step, we have used Levin et al. (2002), Im et al. (2003), ADF-Fisher, and PP-Fisher
(Maddala and Wu 1999; Choi 2001) unit root tests to see the stationary properties of the underlying time series with the null
hypothesis of non-stationarity of the variable.
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Step-II: Panel Cointegration Test: In this step we have examined the long-run equilibrium relationship between
variables using panel cointegration tests as proposed by Pedroni (1999, 2004) and Kao (1999) with the null hypothesis of no
cointegration.
Step-III: Panel Granger Causality Test: In this step, we have used panel Granger causality test following the two-step
Engle-Granger causality procedure (Engle and Granger 1987) with the following dynamic vector error correction model
specification.
p p p
Ln(GSDP)it  1i  1i ECTit 1    11ij Ln( EG )it  j    12ij Ln( DTA)it  j    13ij Ln( FTA)it  j  1it (3.1)
j 1 j 1 j 1
p p p
Ln( DTA)it  2i  2i ECTit 1    21ij Ln( EG )it  j    22ij Ln( DTA)it  j    23ij Ln( FTA)it  j   2it (3.2)
j 1 j 1 j 1
p p p
Ln( FTA)it  3i  3i ECTit 1    31ij Ln( EG )it  j    32ij Ln( DTA)it  j    33ij Ln( FTA)it  j   3it (3.3)
j 1 j 1 j 1

The estimation method widely applied in comparable studies in different fields of research (Bashiri and Pires 2012; Costantini
and Martini 2010; Jaunky 2012a,b) is the Generalized Method of Moments (GMM) proposed by Arellano and Bond (1991),
Arellano and Bover (1995) and Blundell and Bond (1998). Based on these three equations, short-run causality is determined
by the statistical significance of the partial F-statistics associated with the corresponding right hand side variables, and the
long-run causality is revealed by the statistical significance of the respective error correction terms using a t-test. In line with
the literature, these causalities are studied by means of a Wald test. Considering the first equation, the short-run Granger
causality test assesses the validity of the null hypothesis H 0 :  12ij  0 and H 0 :  13ij  0 for all i and j. The long-run
Granger causality test checks for the significance of the ECT coefficient, and in this case the null hypothesis is H 0 : 1i  0
for all i.
Step-IV: Panel Cointegration Estimation: The existence of long-run cointegrating and causal relationships between
variables, however, does not speak about the long-run dynamics between them. So, we have used FMOLS and DOLS
methods of estimating the long-run elasticities in heterogeneous cointegrated panel (Pedroni, 2000, 2001a, 2001b). Kao and
Chiang (2000) pointed out that FMOLS estimator often exhibits small sample bias while DOLS estimator appears to outperform
it. Furthermore, these two methods allow on the null hypothesis to test if there is a strong relationship between tourism and
economic growth for the selected States/UTs of India.
4. Empirical Findings
The results of unit root tests to observe the stationary properties of the underlying variables are presented in Table 3 which
infers that the series are all non-stationary in their levels, but stationary in their first differences. So all variables are I(1). Since
the variables are I(1), we performed the panel cointegration test to understand the dynamics of the long-run equilibrium
relationship between them and the results are presented in Table 4.
Table 3. Results of Panel Unit Root Tests
Method: computation with individual effects Ln(EG) Ln(DTA) Ln(FTA)
LLC Unit Root Test: H0: Unit Root/Non-Stationarity
Level Form 0.9 (0.8) 0.8 (0.815) -0.9 (0.1)
First Difference Form -3.2 (0.0006) * -10.4 (0.000) * -9.184 (0.000) *
IPS Unit Root Test: H0: Unit Root/Non-Stationarity
Level Form 7.0 (1.000) 4.0 (1.000) 2.7 (0.997)
First Difference Form -5.3 (0.000) * -8.4 (0.000) * -9.9 (0.000) *
ADF-Fisher Chi-Square Unit Root Test: H0: Unit Root/Non-Stationarity
Level Form 8.8 (1.000) 22.6 (0.999) 26.9 (0.994)
First Difference Form 117.4 (0.000) * 164.7 (0.000) * 191.4 (0.000) *
PP-Fisher Chi-Square Unit Root Test: H0: Unit Root/Non-Stationarity
Level Form 11.0 (1.000) 24.4 (0.998) 33.7(0.940)
First Difference Form 216.2 (0.000) * 780.8 (0.000) * 525.6 (0.000) *
Note: Values within parentheses are p-values; * rejection of null hypothesis at 1% level of significance;
Source: Authors’ Own Estimation

The upper portion of Table 4 shows the results of Pedroni (2004) cointegration tests whereas the lower portion reports
that of Kao (1999) test. The results of both the tests indicate the existence of a long-run equilibrium relationship between
tourism sector development and real economic growth of India. However, this relationship does not indicate the causal
directions which the relationship flows from one to another.

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Table 4. Results of Panel Cointegration Tests

Pedroni (1999, 2004) Residual Cointegration Tests [Ln(GDP) as Dependent Variable]
Method With Individual Intercept With Individual Intercept and Individual Trend
Within Dimension
Pedroni (1999) Statistic
Panel v-Statistic 0.1 (0.451) 35.4 (0.000) *
Panel rho-Statistic -1.4 (0.074) * 0.5 (0.697)
Panel PP-Statistic -4.1 (0.000) * -4.3(0.000) *
Panel ADF-Statistic -4.4 (0.000) * -5. 8 (0.000) *
Within Dimension
Pedroni (2004) weighted Statistic
Panel v-Statistic 0.2(0.394) 27.2 (0.000) *
Panel rho-Statistic -0.7 (0.214) 0.7 (0.786)
Panel PP-Statistic -3.1 (0.0008) * -2.6 (0.004) *
Panel ADF-Statistic -3.8 (0.0001) * -4.6 (0.000) *
Between Dimension
Group rho-Statistic 1.01 (0.843) 2.5 (0.994)
Group PP-Statistic -2.5 (0.006) * -1.7 (0.036) *
Group ADF-Statistic -3.7 (0.0001) * -5.04 (0.000) *
Kao (1999) Residual Cointegration Test [Ln(GDP) as Dependent Variable]
ADF t-Statistic -3.3(0.0005) *
Note: Out of the seven tests, the panel v-Statistic is one-sided test where large positive values reject the null hypothesis
of no cointegration whereas large negative values for the remaining test statistics reject the null hypothesis of no
cointegration. The values in the parentheses are p-values.
Source: Authors’ Own Estimation

For this purpose, the panel Granger causality test in a vector error correction framework using Engle and Granger
procedure was performed and the results are reported in Table 5. The results clearly provide the evidence of long-run causality
running from domestic tourist visits and foreign tourist visits to economic growth. In other words, there is the evidence of long-
run causality from tourism to economic growth in India. This lends to support the tourism-led growth hypothesis in India. But
there is no evidence in favour of short-run causality from tourism to economic growth. However, there is evidence that
economic growth causes domestic as well as foreign tourist arrivals in the country in the short-run only. In other words, growth-
led tourism hypothesis holds only in the short-run.
Table 5. Results of Panel Granger Causality Test
Short-Run Causality (F-Statistic) Long-Run Causality(t-statistic)
Dependent Variable
∆Ln(EG) ∆Ln(DTA) ∆Ln(FTA) ECT
∆Ln(EG) - 0.94 (0.39) 1.65 (0.19) -1.67 (0.09)***
∆Ln(DTA) 9.79 (0.0001)* - 1.2 (0.30) -0.87 (0.38)
∆Ln(FTA) 6.21 (0.002)* 0.25 (0.78) - -1.00 (0.31)
# values in the parentheses are p-values of respective test statistic
* significant at 1% level; *** significant at 10% level
Source: Authors’ Own Estimation

Since the existence of long-run cointegrating and causal relationships does not speak anything about the long-run
dynamics between the variables, we have used panel FMOLS and DOLS methods of estimating the long-run elasticities of
the impact of tourism sector on the economic growth. The results of panel FMOLS and DOLS estimations are reported in
Table 6. The results indicate the rejection of the null hypothesis at 1% level of significance. It means, the estimated coefficients
of the two variables are positive and statistically significant. This shows that there exists a positive long-run relationship
between tourism sector development and economic growth in Indian States/UTs.
It is evident from FMOLS estimation that 10% increase in domestic tourist arrivals in Indian States/UTs increases
economic growth (in terms of increase in real GSDP) by 7.1% in the long-run. Similarly, 10% increase in foreign tourist visits
to Indian States/UTs increases economic growth by 1.2% in the long-run. Similarly, the DOLS estimators provide the evidence
of positive and significant relationship between tourism sector development and economic growth in Indian States/UTs in the
long-run. Specifically, 10% increase in domestic tourist arrivals in Indian States/UTs increases economic growth by 1.7% in
the long-run.

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Table 6: Results of Panel FMOLS & DOLS Long-Run Estimates

Adj. R-
Variable Coefficient t-Statistic (p-value) R-squared
squared
FMOLS Estimates [Ln(EG) as Dependent Variable]
Panel Method: Weighted Estimation Null Hypothesis: Slope Coefficient is Zero
Ln(DTA) 0.71 60.3 (0.000)*
0.87 0.87
Ln(FTA) 0.12 8.2 (0.000)*
DOLS Estimates [Ln(EG) as Dependent Variable]
Panel Method: Weighted Estimation Null Hypothesis: Slope Coefficient is Zero
Ln(DTA) 0.17 3.9 (0.0001)*
0.98 0.97
Ln(FTA) 0.23 5.8 (0.000)*
Source: Authors’ Own Estimation

Similarly, 10% increase in foreign tourist visits to Indian States/UTs increases economic growth by 2.3% in the long-
run. Overall, it is observed that there is a strong positive long-run relationship between tourism sector development and real
economic growth in Indian States/UTs.
Conclusion
In these days, tourism has become the catalyst of job creation, income and revenue generations, foreign exchange earnings
and infrastructure development in many countries, and India is no exception. Thus, it is rightly hypothesized that the growth
of the tourism sector can lead to the overall economic growth of a country, the well-known tourism-led growth hypothesis. This
paper empirically investigated the validity of this hypothesis in the context of India. It is found that this hypothesis holds good
in the country only in the long-run, but not in the short-run. This finding corroborates to the findings of Mallick et al. (2016). In
the short-run, our results support the growth-led tourism hypothesis. The policy implication of the long-run finding is that the
travel and tourism industry in India can be mobilized as a key economic sector to achieve higher levels of long-run economic
growth. The short-run finding implies that the economic growth can stimulate tourism demand and lead to the growth of tourism
activities in the country which in turn would accumulate them to contribute to long-run economic growth of Indian States/UTs.
Therefore, the policy circle should focus on the promotion of tourism for long-run growth of India. In this context, the
introduction of innovative tourism products, development of tourist destinations, development of supporting infrastructure
including travel, accommodation, etc. along with the guarantee of safety and security of tourists at destinations can be
recommended. In this direction, the Central and State governments are required to play a pivotal role. In addition, the public-
private partnership model also can be implemented. However, this study is delimited by the non-inclusion of other key
indicators of the growth of tourism such as the number of employment created due to tourism, volumes of foreign exchange
earnings from tourism, etc. in India States/UTs. Also, it does not take into consideration various socio-economic characteristics
of Indian States/UTs that influence tourism’s contribution to economic growth, and it does not cover all the States/UTs of India.
In all these respects the present study can further be extended to enlighten the policy circle.
Acknowledgements
We acknowledge the suggestions made by the anonymous reviewers which became instrumental in updating and upgrading
the contents of this paper.
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