Foreign Direct Investment: A Growth Engine for Tourism

Abstract

Foreign direct investment (FDI) is defined as foreign investors stirring their assets into another country where they have control over the management of assets and profits. FDI has the potential to generate employment, raise productivity, enhancing competitiveness of the domestic economy through transfer skills and technology, strengthening infrastructure, enhance exports and contribute to the long-term economic development of the world’s developing countries. With a view to stimulate domestic and international investments in tourism, the government has permitted 100 percent FDI in the automatic route – allowing full FDI into all construction development projects including construction of hotels and resorts, recreational facilities, and city and regional level infrastructure. According to the World Tourism Organization, India will be the leader in the tourism industry in South Asia with 8.9 million arrivals by 2020. India is gradually emerging as the second most rapidly increasing (8.8 percent) tourism economy in the world over 2005-14 according to the World Travel & Tourism. Thus an attempt is made in this paper to examine the foreign direct investment in Indian Tourism Industry, its flow in Indian Tourism Industry and its impact on economy of India.

Keywords: Economy of India, Foreign Direct Investment, FDI Flows, Tourism Industry

JEL Classification: M20, G32