Tourism is an important catalyst for economic development.
Tourism provides direct and indirect employment to 13.5 million people in India. National Action Plan is looking to double it by year 2000. Tourism industry has tremendous capacity to create both direct and indirect employment. Hotels, tour operators, travel agents, transport operators, guides get direct employment through tourism. Plumbers, electricians, vegetable suppliers, taxi drivers, artisans, weavers, shop workers get indirect employment.
The ratio between investment and job creation is much higher in tourism than manufacturing. For example, at a hill station almost all families depend on tourism for their livelihood. Local hotels, restaurants and transport services provide jobs to local people. Local people in turn will require goods, services, education etc which will provide indirect employment to another section of people.
There are some negative employment impacts as well. Most of the jobs are seasonal. So employers go for temporary recruitment or import labour force from outside. This denies employment for local people. Sometimes local people's employment are limited to small jobs and managerial jobs go to outsiders. Shops and restaurants are owned by outsiders. Thus earnings from tourism do not come to locals. The prices of essential commodities will also rise to tourist demand.
Income and employment effects are closely related. Demand for goods and services like accommodation, transport, shopping generate income both direct and indirect. The extend to which direct employment and income generated depends on the volume of tourist traffic, amount of tourist expenditure and pattern of their spending.
Tourism provides income with a multiple effect. Apart from the first recipient of the the tourist money, there are many others who become beneficiaries through chain transactions. The multiplier effect is greater if the tourism industry buys goods or services from local market sectors. If the tendency is to import goods and services, the multiplier effect decreases.
3. Foreign Exchange Earnings
Tourism is the largest foreign exchange earning economic activity in India. Foreign exchange earnings went from Rs.1800 crores to Rs.3916 crores in 1992. RBI calculates the foreign exchange earnings and publishes the estimates after a two year gap. The department of tourism publishes estimates each year. UN report on economic impact on tourism on India noticed that the tourism receipt in dollar has decline when there was an increase in tourist arrivals.The possible reasons are devaluation of rupee, rise in proportion of budget tourists and leakage of money into black market.
While calculating foreign exchange earnings from tourism, the leakage must be subtracted. Otherwise the figures might be misleading. Some of the factors of leakage are
- Money spent for importing goods and material for tourism
- Foreign exchange spent for publicity abroad
- Multinational companies reduce profit and taxes as money is spent in foreign countries
- Commissions paid by tour operators to foreign retailers
- Reduction in or exemption of duties and taxes by host countries on foreign companies
Strategies for minimizing leakages are
- Use local resources instead of imported ones
- Restricting multinationals
- Introducing controls like tourists being required to pay hotel bills, buy things etc in foreign currency only