Welfare from Tourism Activities – A Critical Component for Tourism Regulatory Reforms (Part II)

This is the second article for the series I planned on Tourism regulatory reforms in India. Through much delayed than promised in my previous blog on this series. However, I sincerely hope that this might be useful and interesting to those who are involved with this partially invisible big industry and also for the general readers who take interests in diverse economic issues.

the first question that I would like to answer is why do I touch this complex issue of “Welfare” which is more familiar to social scientists, especially economists and more or less vaguely understood as a common parlance to common men. the primary reason for introducing this particular term in relation to regulatory reform is that the objective of any regulatory reforms process is to increase welfare with or without existence of competition. This prompts that a clear understanding of definition of welfare is required to develop the linkage between tourism, its stakeholders, welfare and finally their importance to regulatory reforms process.

What is welfare?    

In the simplest of words, welfare is when one person’s well-being can be improved without affecting others’ well-being adversely for the good of the society.  As long as this concept remains within a small society, it easy to manage and monitor. The moment the sphere of its applicability increases, it is not only difficult to monitor, about also becomes complex enough to understand how the welfare of the entire society can be captured. For instance, tourism is a global phenomenon, apart from being multi-sectoral. Therefore, to understand the welfare implications of tourism, one needs to capture welfare of “Hosts” and “Guests” as well welfare across sectors like economic, cultural, political, environmental and so on. This complex gamut of tourism suggests that clearly there will be winners and losers in terms of welfare.

To make this simpler, lets divide the tourism economy between “Producers” and “Consumers”. The producers are those who are providing tourism services and consumers are who are enjoying tourism services. All stakeholders (except the policy makers!!) can be categorised in these two groups for each and every kind of tourism activities. Because of diverse characteristics of of tourists and their intentions of maximizing tourism utilities, certainly there are winners and losers. To make it even more explicit, we can explore the concept further from utilitarian perspective.

Derek Hall and Frances Brown explained it nicely in one of their paper on eithis, responsibility and well-being related to tourism. Well-being of a society, though more applicable to Western countries at present, can be though of in three different types:

1. Consumerisation – The society derives its well-being from quantity and variety of material goods

2. Welfare-statism – where well-being is derived from the quantity of public goods and services citizens receive as their rights

3. Eco-welfarism – where well-being is derived from the quality of relationships between people and the relationships between people and natural environment.

These points suggests that welfare from tourism will cut across social, behavirourial, medical, psychological, economic, cultural, environmental – almost every sphere of life. For the developed countries it promotes the concept of Quality of Life. Leisure and tourism is considered as a central part of it by contributing in enhancing welfare through a combination of relaxation of mind , intellectual stimulus and physical activity for fitness. But, when we see tourism enhancing consumers’ welfare, does it also contribute positively to producers’ welfare? If we consider the less developed countries, the answer is no for certain. Most of the time we look at tourism activities from a producers’ approach, where work in providing opportunities for relaxation and rest for consumers is the key component. The key question is whether tourism also does increase quality of life from producer’s perspective. The experience says that in most of the cases it is marginal and sometimes negative.

This is where it is crucial to understand why regulatory reforms are required, especially in the less developed, countries to to keep a parity between producer’s and consumer’s welfare. Unless the industry is regulated in a proper fashion and enhance fair competition while taking care of restraining adverse impact on the host community, sustainable tourism cannot be achieved. To make a clear case of how tourists’, i.e., consumers activities minimize producers’ welfare, I will discuss it in the next article of this series.


Importance of Regulatory Reforms for Indian Tourism – 1

Since long, almost a year now, I was thinking of writing on Indian tourism industry and related regulatory reforms. But somehow not able to find time to start writing on this crucial area. Now, to make sure that I write on this and can share and discuss with those interested in this important aspect of Indian tourism among the tourism fraternity, I have decided to write this in a few installments! This one is the first of the series. My endeavour will be to write one in every week through next 3 to 4 weeks.

As we know that unregulated tourism activities have changed large number of tourism destinations in India beyond repair! But, to add to this pinch further, al these destinations are expanding their space of activities much beyond their own territory. And, of course the tourism stakeholders, especially, the business owners cannot be blamed for this since their only objective remains maximization of revenue and profit. In the process, the ecological balance of the areas are getting destroyed completely leading towards environmental disasters awaiting for all of us. And, this situation has arisen to a large extent due to absence of regulatory framework relating to tourism industry. In fact, if one looks into the tourism industry closely, it would be noticed that there is hardly any regulatory framework in place that can be used for promotion of sustainable tourism. In other words, regulatory framework that can stop unwanted activities on part of the business and facilitating pro-sustainable tourism activities, can hardly be identified.

There are large number of factors behind this absence of regulatory framework relating to tourism sector in India. One of the most important fact is hardly any study has been done to seek a tourism regulatory framework in the country. Fortunately, I can get hold of perhaps the only significant paper available on tourism legislation in India which was prepared by the Indian Institute of Tourism and Travel management (IITTM) because of one of my close friend working with the same institute. the paper was written long back, sometime in mid 1990. The principal author of this paper was a legal expert. Since the focus of the study was also to identify the legislative part of the tourism sector, as expected, the paper concentrated more on the legal aspects instead of an analysis of the merits of these legislation in promoting tourism activities. And, it goes without saying that sustainable tourism did not figure anywhere because in 1990s tourism industry itself was not really recognized properly in India regarding economic context. In fact, till today, sustainable tourism does not bear much importance in India, except some mention about it in bits and pieces. however, this paper is one f the most important one to understand the complexities in framing a regulatory process regarding tourism industry in India. Just to provide the extent of complications, let me enlist some of the laws, as mentioned in the paper, relating to tourism industry. This itself is enough strong to suggest how difficult and yet how important is the regulatory framework for Indian tourism sector.

1. The essential commodities act, 1955, 2. Code of criminal procedure, 1973, 3. The airport authority of India act, 1994, 4. The child labour (prohibition and regulation) act, 1986, 5. The motor vehicle act, 1988, 6. Foreign exchange regulation act, 1973, 7. Consumer protection act, 1986, 8. The environment (protection) act, 1986, 9. The prevention of cruelty to animals act, 1960, 10. The public liability insurance act, 1991, 11. The railways act, 1989, 12. The sarais act, 1867, 13. The immoral traffic (prevention) act, 1956, 14. The employers liability act, 1938, 15. The passport act, 1967, 16. The wild life (protection) act, 1972, 17. The prevention of food adulteration act, 1954, 18. The monopolies and restrictive trade practices act, 1969, 19. Forest conservation act, 1980, 20. The road transport corporation act, 1950, 21. The central excise and sale act, 1950, 22. The Indian partnership act, 1932, 23. The urban land ceiling act, 1976, 24. The industries (development and regulation) act, 1951, 25. The explosives act, 1884, 26. The Indian penal code, 1860, 27. The water (prevention and contro of pollution) act, 1974 & the air (prevention) and control of pollution act, 1981, 28. The Indian contract act, 1872, 29. Development authority act, 30. Municipal act, 31. Ancient monument (site and remains) act, 1951

I believe this list is enough to suggest the complexity of the regulatory aspects thought about relating to tourism sector. If one considers this list, keeping in mind that this list is some of the legislation relating to tourism sector, creating a regulatory framework for tourism sector is not only humongous but also almost impossible since different departments are involved in developing these legislation from the perspective of their own requirement, rather than tourism sector. Therefore, it is crucial that tourism sector regulations are thought of separately, which may include elements of these as well as acts from other domains, but under one single umbrella.

Another big hurdle is constitutional provisions for central and state governments. unless a synchronized regulatory framework is prepared, it will not be able to remove the obstacles or barriers towards a sustainable tourism development in the country. I will discuss this issue in the next blog of this series. Thank you.

First Time a Prime Minister in India Identifies Tourism as an Instrument to Boost Local Economy

August 15th 2014, should be marked as an important day for the Indian tourism sector. It is not because there is a new toruism policy declared since 2002, nor beause of some bold and innovative steps taken by Ministry of Tourism of Indian Government. It is simply because the new prime minister Mr. Narendra Modi’s speech on the eve of India’s Indepence Day ceremony acknowledging the potential role that can be played by tourism activities in generating income and alleviating poverty at the local level. This is one of the simplest common sense, yet unaddressed by any past prime ministers of the country in any occassion as far as I remember.

Mr. Modi has exactly mentioned the grass root level linkage of tourism sector that needs to be harnessed for a sustainable toruism development strategy in the country. His words that captured implications of tourism development for a tea stall owner, petty service providors and the similar ones are the most cricual ones. A sustainable roadmap of tourism sector is always envisaged in the form that generates income and employment for local comminity and local economy. The strong multiplier effect of tourism automatically starts turning the unturned stones of development once these acticities are started at the local level.

This is nothing new to anyone involved with tourism development in some way or other. The major problem faced till now was that the tourism officials were more concerned about how to increase the number of foreign tourists instead of domestic tourists. Recognizing the fact that only 2% of the total toturists arrivals are of foreign origin and 98% are domestic, one fails to understand why we ignore dmestic tourists and concentrate more on foreign tourists. Perhaps it is time that we focus on developing domestic tourism also without taking it for granted. Increasing the number of domestic tourists will boost local economic development much more than that can be harnessed from foreign tourists. However, a few cautionary steps must be taken to develop a sustainable tourism across destinations:

1. Awareness generation amongst domenstic toruists to conserve and protect environemnt and destination which is perhaps completely missing at present.

2. Importance of maintaining cleanliness and respect the local culture while harnessing maximum pleasure from tourism

3. To prefer eco-friendly modes of travel/activities rather than those that increase carbon footprint in the region

Local authorities need to play important role in this. It cannot be expected that behavioural characteristics the the travelers will change automatically as desired for sustainable tourism development. The destination management should be in suach manner that the tourists are made to follow the rules strictly, else penalised severely, so that over a time the scenario changes towards a more disciplined tourism sector in the country. Large number of countries in the world are examples of creating such environment over time. The major role played was by governance than anything else. Hope, the new prime minister’s views to connect the grass root level to tourism activities will be translated into some changes in policy making of the authorities who are at the helm of decision making at central, state as well as local level.

Is the International Tourism to India Changing Its Composition? – A Region-wise Analysis

In my last to last blog, I had shown how Foreign Tourists Arrivals (FTAs) are changing over time. The same blog also identified the pattern of the change and concluded that the revival in foreign tourists arrivals, post 2008 global recession, started since 2012 only.

However, I did not include any analysis on the origin of the FTAs to India. We find the FTA data country-wise as well as region-wise. In this blog, I present a region-wise analysis of FTAs without going into the country-wise details. These series of blogs on FTAs to India is inteded towards a bigger analysis which can finally capture changing pattern of expenditure of foreign tourists in India and how that is occuring over time. It will take me about 4 to 5 more blogs like this one to reach at point whereby I can do that analysis. As I wrote in the previous blog also, I am trying to use lesser texts with more visual presentations so that readers are not burdened with too many texts, but can have the essence clearly with visula representatuions.

The Fig 1 depicts that three top regions of origin of FTAs to India are Western Europe, North America and South Aisa. These three regions contribute to about 65% to 70% of the total FTAs to India during 2010 to 2012. The following figure also suggests that the relative ranks of the regions in terms of FTAs remined same over the period 2010 to 2012.

fig 1

Note: C & S America stands for Central and South America; NEC stands for “Not Classified Elsewhere”. The same are applicable to all graphs used in this blog. Continue reading

Tourism Scenario in India – Some Revelations

In the previous blog I wrote about foreign tourists arrivals to india and some critical concerns about those. In this blog I have shown a more complete picture regarding Indian tourism scenario, including both domestic and international, and its spatial impolications. To make this blog more reader friendly I have given more visual impressions and tried to lessen the burden of text. The latest complete data available on Indian tourism is for the year 2012. Thus, the article talked about 2012 scenario only.

In Figure 1 exhibits number of domestic tourists, foreign tourists and total tourists travelled to different Indian states. If we look carefully at the graph, we find that:

1. Toruists visits are largely concentrated in a 5/6 states. These states are Andhra Pradesh, Tamil Nadu, Uttar Pradesh, karnataka and Tamil Nadu – the top 5 states in terms of total toruists arrivals.


Figure 2 shows the distribution of domestic tourists and total tourists in Indian states. As seen in previous figure, the share shows that about 65% of the total tourists travel to these 5 states. The top ranking state is Andhra Pradesh, which accounts for 20% of the tourists. Continue reading

A Snapshot of Foreign Tourists Arrivals (FTA) in India – A Monthly Analysis from 2010 to June 2014

Tourism is one of the major compenent of foreign exchange earning for India. Since 2003, launch of Increible India campaign, India has seen a significant increase in number of foreign tourists visiting the country. Though it is still an insignificant share of total outbound torusim in the world, the scenario is encouraging over time. Even though the inbound tourism to India was hit substantially because of 2008 global recession, it recovering gradually with global economic recovery.

This particular blog has given a snpshot on how the inbound tourism has changed during last three and half years (till the latest data avaiable). the analysis provides a month-wise scnario so that seasonality involved in inbound tourism can be kept in mind while looking at the pattern.

The graph below exhibits the number of FTAs month-wise from 2010 january till 2014 June. Two important inferences can be made from this visual:

1. For this entire period FTAs have increased for every month.

2. It shows a seasonality in FTAs with peak during the winter, lean during the summer with marginal increase during the month of July.

fta numbers

The next visual exhibits the year-on-year monthly growth in FTA. The inference can be made from this graph is as follows: Continue reading

Foreign Tourists Arrivals to India Reflecting Global Economic Recovery Now

Inbound tourism to India experienced the impact of global economic recession severely starting last quarter of 2008. Though Indian economy apparently showed signs of early recovery towards the end of 2009, other countries were still fighting on how to grapple with recession. However, apart from some of the European countries and Asian countries like Japan, gradually the situation improved towards betterment. Though the countries were still struggling with slow GDP growth, unemployment and other crucial economic indicators, most of the countries started gaining the growth momentum, slowly but steadily.

Indian tourism industry that saw a significant change since beginning of the decade 2000 was hit dearly because of the global economic recession. A sudden dip was observed in inbound tourists to India. And, this was true for every originating country where from tourists visited India. It was expected that the scenario should start changing in a year or two. This was especially true from the perspective of various stakeholders within tourism industry, especially the core ones like hotels, tour operators etc. The hotel prices were slashed significantly with various discounts and incentives on face of recession coupled with fierce competition because of entry of new international as well as smaller domestic players.

However, the scenario did not turn like that. Though economies started moving upwards in most of the countries, especially the developed ones, the impacts were not felt instantly. Anyone worked on tourism demand forecasting for inbound tourists knows that two crucial variables explain substantial part of data variation in tourists’ arrivals to any country. These are income in the originating country (expressed in terms of GDP) and lag of tourist arrivals, i.e., the number of tourists arrived during previous year or so. All other parameters like cost comparison, distance to travel, law and order including terrorist activities etc. do play their role, but to a much lesser extent. But this time, the demand system behaved in a slightly different manner. There was a lag effect that played a crucial role in the system. Increase in income in the originating countries did not show its influence immediately. A look at the data will ensure the explanation in a meaningful manner.

Table 1: Foreign Tourist Arrivals (FTA) in ‘000
 Month 2009 2010 2011 2012 2013 2014
Jan 481 569 624 681 699 720
Feb 490 552 636 677 688 738
Mar 442 512 550 623 640 669
Apr 348 372 438 452 452 504
May 305 332 355 372 384 421
Jun 352 385 412 432 444 492

We find two important points from Table 1 as given above. The data is given for first 6 months of each year starting from 2009 so that no confusion is created regarding the trend. Primarily this is because of the fact that data for 2014 is available till the month of June. So, data for rest of the months for other years may create a noise in the pattern where 2014 data plays a crucial role. The second important reason is Indian tourism is marked with significant periodicity or seasonality which I have mentioned in several of my previous blogs as well as have been clearly established by many research papers. Inclusion of data for other years and not for 2014, may create a problem to identify the proper signals because of seasonality factor.

Two important trends appear from the above data are:

  • In case of each month number of tourists have increased in every year
  • FTA in each month is highest in 2014

These two points simply corroborates the discussion we have previously that there is a slow and steady increase in FTA. To avoid the clutter, I have presented this trend 2012 onward in Figure 1 below. The graph shows clearly that recognizing the seasonality with the crest in Jan-Feb and the trough occurs in May, every year the number of tourists visiting India has increase every year. But does this portray the entire story? The answer is NO. It is too simplistic a conclusion to be made and could have been easily concluded that with economic revival, India’s inbound tourism has also seen an immediate impact.


To prove this particular point, let us have a look at the Figure 2 and Figure 3. These two visuals exhibit growth rates in FTA to India and absolute change in growth rate in the same. If one carefully looks at these two visuals, a few points sharply indicate why the change in tourism behaviour did not start during end of 2010 when the world economy stated looking upwards.

Slide2 Slide3

  • In Figure 2, growth rates, year-on-year basis, in almost every month declined since 2009 to 2013. The representing growth rates during 2012-13 is the bottom most line and all other years follow a sequence in decline except February and April during 2011-12
  • While looking at this point one needs to remember that the base number has increased as the year increases; so it growth rates will always have an edge if it belongs to earlier years
  • In Figure 3, the absolute change in growth rates (Y-O-Y basis) are presented. This is similar to “first difference” that we normally consider in econometric modelling which plays crucial role in any trend analysis.
  • The graph shows that the absolute change in growth also behave almost in similar manner to that we identified in case of growth rates. The red line, which represents absolute change between 2012-13 and 2013-14, appears at the top.

This trend clearly suggests that though apparently it looked like that the inbound tourists arrivals to India has recovered the hit from global recession since 2010, the actual recovery has started only in 2014 January onward. Till then it was more of a falsified trend that might create a wrong perception regarding the recovery of the Indian tourism in terms of foreign tourists’ arrivals. This has significant implications for policy making as well as for core stakeholders in the industry. Also, while forecasting FTA, one needs to look into carefully at the variable behaviours. It is quite possible that lag effect might be much higher than generally though of.