Long run relationship between foreign tourist arrivals and foreign exchange earnings: a co-integration analysis

Tourism has become an important segment of Indian economy contributing substantially to its foreign exchange earnings. It accounts for one-third of the foreign exchange earnings (FEE) of India and also gainfully employs the highest number of people compared to other sectors. This sector also attracts the domestic tourist and foreign tourist in an enthuastic way which resulted in improving well balanced economy for the nation like in India. The tourism industry in India generated about US100 billion in 2008 and that is expected to increase to US275.5 billion by 2018 at a 9.4 annual growth rate. World over tourism has been recognized as one of the important instruments of economic development and employment generation, particularly in remote and backward areas. It is the largest service industry globally in terms of gross revenue as well as foreign exchange earnings. Tourism can play an important and effective role in achieving the growth with equity objective which India has set for itself. The growth in the tourism sector emerged as a very important contribution to the national economy and contributed quite a lot for employment generation in various tourism related activities. The present paper analyzes the trends in foreign exchange earnings of tourism industry in India and the economic contribution of this sector to Indian economy in the context of changes in the macroeconomic policies