Aman Balsara I Amit Kumar I Anjali Tyagi

INTRODUCTION
• Tourism is an economic activity that has a
significant impact on the economic conditions of
the host country and tourist’s home country.
• It creates ample income opportunities for the
community in and around the destinations.
• This dynamic sector helps generate direct and
indirect income for skilled, semi-skilled and
unskilled people.
• The flow of tourist brings in the massive changes in
terms of the growth of GDP, per capita income, and
foreign exchange earnings from exports.
• Thus, major foreign exchange earner and a
powerful tax revenue generator for local, state and
• It facilitates huge infrastructure and
superstructure development.
• Unlike other manufacturing and service
sector this has a high level of multiplier
effects and trickle-down effect.
• Revenue flows through tourist expenditure
and reaches to bottom of society at a
faster rate.
• The bright side of tourism is development,
poverty eradication and employment
generation.
Concept Of Tourism Impact
The impact of tourism
The impact can be
is the outcome of
either positive or
tourism development
negative
in an area.

The negative impact

Positive impact includes
rising income, employment,
multiplier effect, higher
GDP growth, reduction of
balance of payment deficits
and poverty alleviation.
includes
displacement effect,
demonstration effect,
carrying capacity
issues, and
environmental issues.
• Ideal tourism planning aims at
amplification of social and economic well-
being of the people that would ultimately
inculcate fellow feelings and universal
brotherhood.
• As tourism businesses keep growing,
supplementary opportunities are
generated for investment in terms of
facilities and amenities in and around the
locality of the destination.
• Tourism helps in development of public
utilities such as potable drinking water,
sewage system, transport, public
restrooms etc.
• These not only provide comfort for
 Economic Development through Tourism in Bhutan
• Started promotion of Inbound tourism in !974.
• Tourism is 3rd largest export earner and they earn foreign
exchange through showcasing rich Buddhist Culture.
• As per total estimate ,between 17,800 -19,600 jobs were
created under tourism sector.
 Flow of tourism Revenues into the economy (UNWTO)
Tourists spend directly for Travel and tourism companies spend directly for

Lodging Wages, salaries, tips, and gratuities

Food Commissions and payroll taxes
Beverages Food and Beverage stocks
Entertainment Music and entertainment
Clothing Administrative expenses
Gifts and souvenirs Professional services and insurance premiums
Photography Advertisement and publicity
Medicines and medical attention Utilities, gas, water, electricity, sewerage, and rubbish
removal
Jewellery Purchases of goods for sales
Tobacco Materials and Supplies
Hairdressing Repair and maintenance
Cosmetics Transportation, licenses, and taxes
Internal transport Rentals of premises and equipment
Tours and Sightseeing Interest charges and loan repayments
Miscellaneous Capital asset replacements
 Direct GDP Contribution
Forecast for
2017 2018
3.7%
INR
5,943.3Billiom
7.6%
INR
6,392.7Billiom
NEGETIVE IMPACT
Negative economic impacts of tourism

LEAKAGE DISPLACEMENT ENCLAVE INFRASTRUCTURE

EFFECT TOURISM COST

INCREASING ECONOMIC SEASONAL

PRICES DEPENDENCE CHARACTER OF
JOBS
 Leakage
• Leakage occurs when
tourists money are used to
purchase needed goods or
services from outside the
area.
• The more imports that are
necessary, the higher the
leakage will be.
• Leakage goes to negligible
in a self sustaining
Economy.
• In addition, significant amounts of income actually
retained at destination level can again through
leakage.
• A study of tourism `leakage` in thailand estimated
that 70% of all money spent by tourists ended up
leaving.
• Estimates for the other third world countries range
from the 80% in the caribbean to 40% in India.
Displacement
Effect
• Displacement refers to
the physical
dispossession of people
from their lands.
• E.g. Commonwealth
games in Delhi for
Special Tourism
Zone.(In which people
from nearby by villages
are displaced)
• There are two main ways that leakage occurs:
-> Import leakage
• This commonly occurs when tourists demand standards of
equipment, food, and other products that the host country
cannot supply.
• Especially In LEDC’s , food and drinks must often be imported,
since local product are not up to the hotel’s (i.e. tourists)
standards or the country simply doesn’t have a supplying
industry.
• The average import related leakage for most developing
countries is between 40% and 50% of gross tourism earning for
small economies and between 10% and 20% for most advanced
and diversified economies.
-> export leakage
• TNC’s have a substantial share in the export leakage.
• Often, especially in poor developing countries
destination, they are the only ones that posses the
necessary capital to invest in the construction of
tourism infrastructure and facilities.
• An export leakage arises when overseas investors who
finance the resorts and hotels take their profits back
to their country.
 Enclave tourism
• Local businesses often see their chances to earn
income from tourists severely reduced by the creation
of all inclusive vacation packages.
• When tourists remain for their entire stay at the same
cruise ship or resort, which provide everything they
need and their will make all their expenditures, not
much opportunity is left for local people to profit
from tourism.
• Small trickle down effect on local economies.
• The cruise ship industry provide another example of
economic enclave tourism.
• Non river cruises carried some 8.7 million
international passenger in 1999.
• On many ships, especially in the Caribbean, guests
are encouraged to spend most of their time and
money on board, and opportunities to spend in
some ports are closely managed.
 Infrastructure cost
• Tourism development can cost the local
government and local taxpayers a great deal of
money.
• Developers may want the government to improve
the airports, roads and other infrastructure, and
possibly to provide tax breaks and other financial
advantages which are costly activities for the
government.
• Public resources spent on subsidized infrastructure
or tax breaks may reduce government investment
in other critical areas such as education and health.
 Increase in prices
• Increasing demand for basic services and goods
from tourists will often cause price hikes that
negatively affects local people and residents whose
income does not increase proportionately.
• Tourism development and the related rise in real
estate demand may dramatically increases building
costs and land values.
• This makes it more difficult for local people to meet
their basic daily needs.
 Economics dependence of the local
community on tourism
• Diversification in an economy is a sign of health,
however if a country or region become dependent for
its economic survival upon one industry, it can put
major stress this industry as well as the people
involved to perform well.
• Many countries , especially developing countries with
the little ability to explore other resources, have
embraced tourism as a way to boost the economy.
• In the Gambia, for instance 30% of the workforce
depends directly or indirectly on tourism. In small
island developing state percentages range from 83%
in the Maldives to 21% in the Seychelles and 34%
Jamaica.
Seasonal Character Of Jobs
Problem that seasonal workers face include:
• Job and therefore income insecurely.
• No guarantee of employment from one season to
the next season.
• Difficulties in getting training, employment related
medical benefits, and recognition of their
experience.
• Unsatisfactory housing and working conditions.
Positive Impact
 Multiplier Effect
It simply means-
How many times
money spend by a
tourist circulates
though a host
country's economy.
• This economic concept was conceived in 19th
century and developed throughout the early
20th century
• Works of John Maynard Keynes in 1930s helps it
 Multiplier model
New Hotel Sets up

Created Jobs directly in Local Business

the hotels Supply Services

Other companies are

attracted to the area
More jobs are
Worker spend their indirectly Created
income in local area;
increase in tax revenue

The area becomes a more Tax Spent on Improving

popular tourist infrastructure, image
destination, increasing and tourist services
Money Lost Through profitability and revenue
Leakage for re-investment
 Employment Generation

• Tourism provides a huge amount of employment through

direct, indirect and induced manner.
• One in every ten jobs on the planet is in Tourism.
• tourism industry provides tremendous opportunity for
relatively small businesses to thrive and is a leading
generator of jobs.
 Employment Figures
(An Increase Of 2.1% PA

33,195,000
[ Year-2028 ]
(5.0% of 26,883,000
total Forecasted to grow
Employment) by 2.8% in 2018
26,148,000
Jobs directly in 2017
 Foreign Exchange Earnings

• Tourism is one of the top five export categories for

as many as 83% of countries and is a main source
of foreign exchange earnings for at least 38% of
countries.
• Tourism expenditures generate income to the host
economy and can stimulate the investment
necessary to finance growth in other economic
sectors.
FEEs during the month of December 2017 were Rs.
19,514 crore as compared to Rs. 16,558 crore in
December 2016 and Rs. 14,152 crore in December 2015.

The growth rate in FEEs

in rupee terms in
December 2017 over
December 2016 has
increased to 17.9%,
compared to 17.0% in
December 2016 over
December 2015.
 Regional Development
• Through sustainable tourism the local economy gets
stronger and it finally helps in development of the region.
• Regional development includes
• Better investment opportunities
• Infrastructure development
• Growth of local economy
• Better standard of living

• Money is earned from tourism through informal

employment (e.g. street vendors, informal guides, rickshaw
drivers).This money finally return to local economy and have
a great multiplier effect.
References
• https://ideas.repec.org/p/wiw/wiwrsa/ersa01p273.
html
• https://geographyfieldwork.com/TouristMultiplier.h
tm
• https://www.slideshare.net/EmanAbbas/economic-
impact-of-tourism-13613739
• https://www.wttc.org/-
/media/files/reports/economic-impact-
research/countries-2018/india2018.pdf