The article shows a detail information about Impacts of Tourism including Economical, Financial, Demand, and Environmental Assessment Analysis. The article gives information about Tourism Multiplier effects, Five Year Plans on Indian Tourism, and Tourism Monetary Policy
Table of Contents
Impacts of Tourism
-Economic Analysis:
An economic impact analysis traces the flows of spending associated with tourism activity in a region to identify changes in sales, tax revenues, income, and jobs due to tourism activity. The principal methods here are visitor spending surveys, analysis of secondary data from government economic statistics, economic base models, input-output models and multipliers. (Frechtling 1994a).
-Financial Analysis:
A financial analysis determines whether a business will generate sufficient revenues to cover its costs and make a reasonable profit. For example, a travel agency has to design tour packages according to the services they can afford and offer to gain profitability.
-Demand Analysis:
A demand analysis estimates or predicts the number and/or types of visitors to an area via an estimation, forecasting or demand model. For example- A travel agency has to look for some emerging destination to keep updating its services in order to gain visitors in the future.
-Environment Impact Assessment:
An environmental assessment determines the impacts of a proposed action on the environment, generally including changes in social, cultural, economic, biological, physical, and ecological systems. For example- A homestay in hilly region of Uttarakhand offers all sustainable and eco-friendly stay while offering them unique experiences.
-Multiplier Effects and its types:
Multipliers capture the secondary economic effects (indirect and induced) of tourism activity. Multipliers represent the economic interdependencies between sectors within a particular region’s economy.
- Direct effects are production changes associated with the immediate effects of changes in tourism expenditures.
- Indirect effects are the production changes resulting from various rounds of re-spending of the hotel industry’s receipts in other backward-linked industries (i.e., industries supplying products and services to hotels).
- Induced effects are the changes in economic activity resulting from household spending of income earned directly or indirectly as a result of tourism spending.
Sales multiplier = (direct sales + indirect sales)/ direct sales.
Economic Impact of Tourism = Number of Tourists * Average Spending per Visitor * Multiplier
-Displacement Effect:
It refers to the effect of the physical dispossession of people from their lands. For example, displacement of people for Common wealth games in Delhi for Special Tourism Zone.
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-Monetary Policy: Repo Rate, Reverse Repo Rate
- Repo Rate:
Repo rate is the rate at which RBI lends to its clients generally against government securities. Reduction in repo rate helps the commercial banks to get money at a cheaper rate and increase in repo rate discourages the commercial banks to get money as the rate increases and becomes expensive.
- Reverse Repo Rate:
It is the rate at which the central bank of a country (RBI) borrows money from commercial bank within the country. It is a monetary policy instrument which can be used to control the money supply in the country.
- Cash Reverse Ratio:
Cash Reserve Ratio is a certain percentage of bank deposits which banks are required to keep with RBI in the form of reserves or balances. The higher the CRR with the RBI, the lower will be the liquidity in the system, and vice versa.
-Economic System:
During 1988-99, employment generation through tourism is 14.79 million.
- Macro: This depicts how the overall economy works
- Micro: This depicts how supply and demand interact in individual market for good and
services.
Special terminologies in Tourism Industry
1. Special Economic Zone (SEZ):
The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment (FDI). A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country’s national borders, and their aims include increased trade balance, employment, increased investment, job creation and effective administration. Some of the SEZs are Santa Cruz (Maharashtra), Cochin (Kerala), Surat (Gujarat), Chennai (Tamil Nadu), Vishakhapatnam (Andhra Pradesh), Falta (West Bengal), Noida (Uttar Pradesh), Indore (Madhya Pradesh).
2. Special Tourist Zone (STZ):
The term “special tourist zone” means an area designated as one exempted or granted leniency from regulations under any statute related to tourism activities and in which it is required to apply endeavors to develop an environment for tourism, such as services, information systems, and public relations, relating to tourism activities in order to facilitate the attraction of foreign tourists under Article 2 (11) of the Tourism Promotion Act. Some of them are Bekal (Kerala), Sindhudurg (Maharashtra), Kancheepuram, Mahabalipuram (Tamil Nadu).
3. Special Purpose Vehicle (SPV):
Special Purpose Vehicles are being anchored by NTAC (National Tourism Advisory Council),2006. The Special Tourist Zones which will be connected with major railway stations, bus stand, airport, etc. will be anchored as Special Purpose Vehicles (SPVs) that will be set up in partnership with the States.
4. Protected Area Permit (PAP):
The Foreigners (Protected Areas) Order 1958 states that a Protected Area Permit (PAP) is required for non-Indian citizens to visit certain areas in India (mainly in the North-East). Certain requirements have to be fulfilled in order to get this permit. Indian citizens who are not resident in these areas need an Inner Line Permit (ILP) to enter these places. Some of the protected areas are:
- Whole of Arunachal Pradesh
- Parts of Himachal Pradesh
- Parts of Jammu & Kashmir
- Whole of Manipur
- Whole of Mizoram
- Whole of Nagaland
- Parts of Rajasthan
- Whole of Sikkim (partly in Protected Area and partly in Restricted Area)
- Parts of Uttarakhand (Niti Valley, Nanda Devi)
Five Year Plans for Tourism since its initiation
Tourism planning with Five-year plans:
- 1951-1956 (1st Five Year plan): In 1955, tourist traffic upgraded and offices opened in London and Paris, Melbourne and Colombo.
- 1956-1961 (2nd Five Year plan): Attention in national level is started to given. Investment of INR 1.08 crore for the development of infrastructure.
- 1961-1966 (3rd Five Year plan): The concentration is largely on accommodation and transport facilities. The investment plan is of INR 4 crore was sanctioned. ITDC was setup unifying HCI, ITTU and India tourism Corporation. In 1967, Ministry of Civil Aviation and tourism formed.
- 1969-1974 (4th Five Year plan): The plan started looking at foreign exchange earnings as prime objective with investment of INR 25 crore.
- 1974-1979 (5th Five Year plan): The tourism industry suffered a setback with reduction in investment to INR 23.62 crore.
- 1980-1985 (6th Five Year plan): There is increase in fund to INR 72 crores. The focus shifted to social and economic benefits like employment, support of local art and artisans etc. Tourism policy formed.
- 1985-1990 (7th Five Year plan): The investment increased to INR 138.68 crore leading to the development of tourism circuits, new forms of tourism, development of new destinations and formation of TFCI in 1989.
- 1992-1997 (8th Five Year plan): The investment increased to INR 272 crore with the introduction of STAs for further growth. In 1992, Action plan was implemented to increase India’s share and foreign exchange earnings.
- 1997-2002 (9th Five Year plan): The approach here is concentrated in selected centers like promoting rural tourism etc.
- 2002-2007 (10th Five Year plan): In this plan, there is lots of work done to promote tourism like Incredible India campaign.
- 2007-2012 (11th Five Year plan): There is increment in International tourist arrivals approx. 10 million and schemes like PIDDC introduced.
- 2012-2017 (12th Five Year plan): Incredible India 2.0 was introduced to promote the new destinations with notion of sustainable and clean destination with hassle free travel.
The 13th plan was put an end and Niti Ayog (National Institution of Transforming India) is setup, a seven-year strategy from 2017-2024 with 3-year action agenda from 2017-2020.
Measurement of Tourist Demand
Measurement of Tourism demand:
- No. of trips = No. of tourists/ No. of trips
- Total tourist nights = No. of trips * average length of stay
Measures of Demand:
D = f (Propensity, resistance)
Propensity = person’s willing to travel
Resistance = relative attractiveness of destination
It can also be measured by:
- Tourism Information System
- TSA- volume of tourist arrivals, length of stay etc.
- Tourism and holiday surveys
- Tourism production Index
- Multiplier effect: In this, new demand means new way of income. The size depends on
marginal propensity to consume(mpc) so, mps = 1/ (1-mpc) = 1/mps - Displacement effect: The effect presents divergent options
- Repo rate: It is the rate at which RBI lends it to its clients against government
securities. Reduction helps commercial bank to get money at cheaper rate. - Reverse Repo rate: The rate at which RBI borrows money from commercial bank. Increase in both rates is a symbol of tightening of the policy.
- Cash reverse Ratio: The certain percentage of bank deposits which banks keep in form of reserves between (15%-3%).
