1 The Impact of Terror Incidents on US and EU Tourist Arrivals in India: The need for a Variable that captures Terror Incidents in Tourism Forecasting Models

The Indian tourism industry has been booming over the past few years, significantly contributing towards the foreign exchange reserves, gross domestic product and employment of the country. The Ministry of Tourism‟s investment and promotion strategy was a major reason for the growth. This paper claims that the benefits of these strategies have not reached their full potential due to incidents of terrorism deterring tourist arrivals from the USA and the EU. This paper will aim to empirically analyze the determinants for USA and EU tourist arrivals to India using data over the period of 56 quarters from 1994-2007. The results show that terror incidents significantly and negatively affect tourist arrivals from these countries. The paper thus concludes by claiming that terror incidents place a threat on the growth of the tourism industry. It also hypothesizes that the Ministry of Tourism must include a variable that captures terrorist incidents in their tourist arrivals forecasting strategies. This will allow them have efficient investment strategies and policies