Infrastructure and Tourism Development: A Panel Data Analysis

Infrastructure and Tourism Development: A Panel Data Analysis

Sourav Kumar Das (Vidyasagar University, India) and Tonmoy Chatterjee (Ananda Chandra College, India)
DOI: 10.4018/978-1-5225-2361-1.ch011
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Infrastructure is not the engine but the wheels of economic development. Since the onset of economic crisis, followed by economic reforms, the importance of infrastructure development has been emphasised through policy, pronouncements, higher budgetary allocation of funds, formation of Infrastructure development, etc. It opens out a region by providing an access to its tourist places. In its absence, the resource potential for tourism can't be of any benefit. In addition to the common infrastructure tourism development requires special infrastructures, which is growing importance to India and foreign tourists in recent years. This chapter tries to investigate the significance of infrastructure as a factor in tourism development by applying panel data estimation techniques upon 27 Indian States for the period 2005-2015 and finds that the infrastructure has been contributing positively to tourist arrivals, particularly from India and abroad. Apart from this we have also shown that tourist arrivals from host along with infrastructure expenditure will affect Indian tourism in a positive manner.
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Infrastructures, pre requisites for development of an economy, generally referred to as power, transport, communication and information services, are externalities available to all sectors. Since the onset of economic crisis, followed by economic reforms, the importance of infrastructure has been emphasized through policy pronouncements, higher budgetary allocation of funds, formation of Infrastructure development financial corporation, huge private intervention, both Indian and foreign.

Tourism thrives on such factors as natural advantages, historical, cultural and artistic wealth of a country and is a general booster of economic growth while is directly encourages development of transport, travel and trades and it gives fillip to art and crafts, it indirectly augments the State revenue through sales tax, income tax and other sources.

Tourist infrastructure forms a vital basis for tourism development. It is a component of regional touristic product. It envelops a variety of essential amenities and supplementary facilities. The basic facilities for tourism have to be provided at three nodal points:

  • 1.

    Those required at the tourist points,

  • 2.

    Continued enroute along the journey upto the destination area, and

  • 3.

    At the destination areas.

The domestic tourism, if properly developed, will itself function as infrastructure for external tourism. The requirements for domestic tourism have to the assessed and plans chalked out for meeting these requirements and this will be the first step towards development of infrastructure. The creation of these facilities will also contribute towards economic uplift of the area by generating relative activities by private enterprises. Future increase in tourist flow mainly depends on integrated growth and development of areas of tourist interest. It becomes necessary to see that the development plan and design are in harmony with the overall objective of promoting a unique character making the best use of natural features.

The operation of tourism facilities, services and amenities are often dependent on a number of travel infrastructure networks. These networks may include transportation, water supply, energy/power, waste disposal and telecommunications. There is some ambivalence towards the view that all the infrastructure networks must be in place before tourism activity can take place. The reason is that in some developing countries, resort developments appear to function adequately and to the satisfaction of their clients without full infrastructure systems being in place. In the case of some forms of tourism development, the lack of a complete network of modern highways may be advantageous in that the absence of the network acts as a deterrent to the penetration of mass tourism to environmentally sensitive areas. For some isolated tourism development, such as independent and sometimes remote integrated resorts, all the basic operating infrastructure systems are incorporated in the overall design, while in regard to infrastructure the resort may be self-sufficient without needing any connection to any more general urban or regional systems. The problem with the independent resort unit may be that it solves satisfactorily all its infrastructure needs within its own territory, but by doing so, may “export” some of the water supply and waste disposal problems to other areas.

The most usual case in tourism development is for infrastructure development to precede the completion of the tourism facilities. This may mean that the installation of the infrastructure becomes a public sector responsibility, with some escalation of the cost for development as a contribution to the overall costs of tourism development. A rationale for the infrastructure services being a public sector responsibility includes consideration of the following factors:

  • 1.

    The network of services is most likely available to both tourists and residents of the area;

  • 2.

    Achievement of consistency in standards is desirable;

  • 3.

    The construction of an integrated system may facilitate non-tourism development within the region;

  • 4.

    The network will facilitate development that contributes to the economic welfare of the resort or region; and

  • 5.

    The network will need to be maintained by public agencies to ensure that prescribed standards are met.

Key Terms in this Chapter

Infrastructure: Structures, systems, and facilities serving the economy of a business, industry, country, city, town, or area, including the services and facilities necessary for its economy to function. It is typically a term to characterize the existence or condition of costly 'technical structures' such as roads, bridges, tunnels, or other constructed facilities such as loading docks, cold storage chambers, electrical capacity, fuel tanks, cranes, overhead clearances, or components of water supplies, sewers, electrical grids, telecommunications, and so forth. Infrastructure thus consists of improvements with significant cost to develop or install that return an important value over time. Infrastructure can be defined as “the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions.” The word infrastructure has been used in English since at least 1887 and in French since at least 1875, originally meaning “The installations that form the basis for any operation or system”.

Indian Tourism: Economically important and is growing rapidly. The World Travel & Tourism Council calculated that tourism generated INR8.31 lakh crore (US$120 billion) or 6.3% of the nation's GDP in 2015 and supported 37.315 million jobs, 8.7% of its total employment. The sector is predicted to grow at an average annual rate of 7.5% to INR18.36 lakh crore (US$270 billion) by 2025 (7.2% of GDP). In October 2015, India's medical tourism sector was estimated to be worth US$3 billion. It is projected to grow to $7–8 billion by 2020. In 2014, 184,298 foreign patients travelled to India to seek medical treatment. About 80.27 lac (8.027 million) foreign tourists arrived in India in 2015 compared to 76.79 lakh (7.679 million) in 2014, recording a growth of 4.5%. Domestic tourist visits to all states and Union Territories numbered 1,036.35 million in 2012, an increase of 16.5% from 2011. In 2014, Tamil Nadu, Maharashtra and Uttar Pradesh were the most popular states for tourists. Chennai, Delhi, Mumbai and Agra have been the four most visited cities of India by foreign tourists during the year 2011. Worldwide, Chennai is ranked 38 by the number of foreign tourists, while Mumbai is ranked at 50, Delhi at 52 and Agra at 66 and Kolkata at 99.Despite the rich cultural and natural heritage which India possesses, the security issues and crime — especially against female visitors, form a persisting trouble that has plagued the Indian tourism industry.

Tourism: Travel for pleasure; also the theory and practice of touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tours. Tourism may be international, or within the traveller’s country. The World Tourism Organization defines tourism more generally, in terms which go “beyond the common perception of tourism as being limited to holiday activity only “, as people “travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes”. Tourism can be domestic or international, and international tourism has both incoming and outgoing implications on a country's balance of payments. Today, tourism is a major source of income for many countries, and affects the economy of both the source and host countries, in some cases being of vital importance. Tourism suffered as a result of a strong economic slowdown of the late-2000s recession, between the second half of 2008 and the end of 2009, and the outbreak of the H1N1 influenza virus, but slowly recovered. International tourism receipts (the travel item in the balance of payments) grew to US$1.03 trillion (€740 billion) in 2011, corresponding to an increase in real terms of 3.8% from 2010. International tourist arrivals surpassed the milestone of 1 billion tourists globally for the first time in 2012, emerging markets such as China, Russia and Brazil had significantly increased their spending over the previous decade. The ITB Berlin is the world's leading tourism trade fair.

Economic Development: Process by which a nation improves the economic, political, and social well-being of its people. The term has been used frequently by economists, politicians, and others in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used while discussing economic development. Economic development has a direct relationship with the environment and environmental issues. Whereas economic development is a policy intervention endeavour with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist A. Sen points out, “economic growth is one aspect of the process of economic development”.

Panel Data Analysis: Statistical method, widely used in social science, epidemiology, and econometrics, which deals with two and “n”-dimensional (in and by the - cross sectional/times series time) panel data.

Foreign Tourist Arrivals: The number of arrivals of tourists/visitors. An individual who makes multiple trips to the country is counted each time as a new arrival. Foreign Exchange Earnings from tourism are the receipts of the country as a result of consumption expenditure, i.e. payments made for goods and services acquired, by foreign visitors in the economy out of the foreign currency brought by them. The number of Domestic Tourist Visits to different States and Union Territories (UTs) are being compiled based on the information received from them.

Foreign Exchange Earnings: Monetary gain made by selling goods and services or by exchanging currencies in global markets. Such markets are known as Foreign Exchange markets/ Forex markets.

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