Exploring the Causal Relationship Between International Tourism and Economic Development in India: Evidence from Granger Causality Analysis

Abstract

Tourism has emerged as one of the most dynamic sectors contributing to economic growth, particularly in countries with rich cultural heritage and diverse attractions like India. This study explores the causal relationship between international tourism and economic development in India by employing Granger causality analysis on time-series data spanning from 1990 to 2024. The analysis investigates whether international tourist arrivals can predict changes in economic indicators such as GDP, employment, and infrastructure development, or vice versa. The results reveal a unidirectional causality running from international tourism to economic growth, indicating that an increase in foreign tourist arrivals positively influences the Indian economy. These findings highlight the role of tourism not only as a source of foreign exchange earnings but also as a catalyst for employment generation, infrastructural expansion, and regional development. Furthermore, the study underscores the importance of strategic policies to promote tourism, including improving infrastructure, facilitating easier travel and visa regulations, and implementing sustainable tourism practices. By emphasizing the predictive relationship between tourism and economic development, this research provides valuable insights for policymakers, investors, and stakeholders seeking to leverage tourism as a driver of sustainable economic growth in India.