The Impact of Globalization on the Growth of Tourism and Hospitality Industry in India - Essay Example

The Impact of Globalization on the Growth of Tourism and Hospitality Industry in India Introduction Tourism and hospitality industry have been acclaimed as an important source of foreign exchange for most of the countries across the world (Holloway 1989). Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries (Brigs 1997). India is also no exception to this universal phenomenon. In India, tourism industry has been viewed as the engine of economic development and one of the major employment generators for the last few years (Negi 1995). Like any other country, inbound tourism has been in existence in India from time immemorial. But, with more and more foreigners attracted by the scenic beauty and cultural heritage of the country, tourism industry has grown phenomenally and started its journey (Karma et al. 2002). Over the last few years, tourism and hospitality industry in the country have grown tremendously with great support for the economy (Gupta et al. 1995). Globalization and eventual economic integration of countries has accelerated the growth of tourism sector and hospitality industry. Though there are many dimensions for globalization as a force, the most important are economic, socio-cultural and technological (McMichael 2000). The present essay seeks to present what implications the country has been facing as a result of globalisation in the tourism and hospitality industry. The report takes an analytical approach where all the dimensions of globalization are looked into and examined by presenting the political, economic, socio-cultural and technological impacts on the tourism and hospitality sector. Background Indian tourism and hospitality industry has been poised for a big growth over the last few years owing to multitudinous factors. Among the various drivers of growth of these sectors as a boost for economic development, globalisation and its resultant plea for economy integration of the country with rest of the world is considered to be the key factors. In the light of globalization, the country is forced to keep in track with the needs of the travelers from across the world and find amenities and possibilities to make them happy to sustain the development of the industry. Not only in India, tourism and hospitality is the most sought after service that experience an unprecedented growth and development (Bezbaruah 1999). Indeed, globalization has facilitated the sector in a big way and at the same time there might be some threats, social, cultural; and economic. By virtue of repeated arguments for the liberalization of the economy, India reformed its economic policies in the year 1990 as the first move towards globalization (Bhatia 1995). Since then, there have been many milestones in the service and manufacturing sector that contributed faster economic development than in the past. The globalization of tourism industry and eventual spurt in the hospitality sector has resulted in cross-border delivery of health services for around $140 billion (Chanda 2002). In the first half of the 1990s, hospitality industry has grown at an annual rate of 16% and as of 2007 the total value comes to not less than $34 billion. This is further increased to $34 per capita, or roughly 6% of GDP. It is also estimated that by the end of 2012, the country7's hospitality sector is projected to improve to $40 billion (Emerging market report 2007). At this juncture, the present essay is an attempt to highlight the impact of globalisation on the tourism and hospitality industry. It is understood that globalisation has many dimensions such as economic, socio-cultural, and political and legal. Therefore, he paper mainly focuses on these implications as a result of globalization. A Brief Note on Globalization The term globalization' was first used by Thodore Levitt in 'The Globalization of Markets'. He used the term to characterize "the vast changes that have taken place over the past two decades in the international economy-the rapid and pervasive diffusion around the world of production, consumption and investment of goods, services, capital and technology"(Levitt, 1985). It is commonly understood as the integration and interdependence among countries resulting from the free flow of trade, finance, ideas and people in a one global system. According to the one of the official sources of the World Bank, globalization is "the growing integration of economies and societies around the world"(Barro, 1994). The term also implies that changes in societies and the world economy have resulted from the dramatically increased international trade and cultural exchange. In fact, globalization is treated differently by different people from their own perspectives. Chang Yi-Jen, in the context of globalization remarks that today, capital is seen moving freely across the world. Internet technologies are creating global networks across national and international boundaries. Cultural influences are flowing across national and international boundaries" (Chang Yi-Jen, 2006). One of the key effects of globalization is the increase of international integration in the market for goods, technology, finance, capital services and labor. An important indicator of the progress of globalization is the marked reduction in the difference in prices for both final products and factors of production, both within and among countries. Both this and its related effects are being felt by almost all nations of the world, most notably in countries where there exist open economies, like India Economic globalization and influence on the growth of T&H industry Since India has implemented its economic reform policies in the light of accelerated plea for the integration with world economy in the 1990s, the country has been flourishing in almost all sectors with an unprecedented growth in service sector (Kamra 1997). The service sector comprising of tourism and hospitality accounts for nearly 60% of the country's overall economic growth (Dahlman 2005). It has been observed that tourism and hospitality sector has been the most lucrative among the various service industries (Mckinsey 2002). The factors that led to the increased demand for the tourism and hospitality sector, according to various experts are Growing public-private partnership focusing on growth of tourism and hotel infrastructure (Rupa 2007); Enhancement of road, rail and air connectivity (Satpathy 2006); Development of popular tourism destinations (Dahlman 20054); Innovative new tourism products such as medical, well-being, golf, cruise, adventure, wildlife, rural, cultural and heritage tourism (McKinsey 2002); and Promotion and marketing of India as an Incredible destination (Doswell 1997). However, a Nobel-prize winning US economist has warned that public services could suffer in countries like India as a result of globalization (Stiglitz). The Professor opined that globalization had led to lower tariffs, an important source of public revenue and "a decline in tariff leads to less money for the governments to spend on its people" (Stiglitz). Thus, globalization can also contribute negatives to an economy, if the conditions in the economy are not cordial to welcome the economic integration. Some of the important hostile factors that will contribute negative results in the economy are described by Olins Wally. He remarks that the country is plagued by a number of factors which include government's apathy, poor infrastructure, law and order problem, tough visa regulations and poor sanitary conditions (Wally 2002). Socio-cultural globalization and influence on growth of T&H industry In a globalised society, people around the world are interconnected one another through sophisticated information and communication technologies. This resulted in the flow of travelers to various places of their attraction to enjoy different culture and styles. The major issues addressed as forces that make an impact upon the societal and cultural aspects of the country are, gender roles, sexual behavior and personal freedom; changing identities; conflict over the natural environment and development plans; the construction and utilization of history the shifting centers of power; cultural values and new approaches to family life (Goyal 2002). In one of the states of the country, a study has been conducted by Chanchal Kumar Sharma in "Tourism Policy Innovations of an Indian State (Haryana) and their Implications", in which the researcher observes certain socio-cultural dimensions of tourism initiated as part of globalization. The author remarks that "increased attention to exploit tourism may lead to unsustainable tourism damaging the cultural heritage and social values of the region" (Ojha 2002). These findings reveal that globalized tourism has enhanced the possibilities for the loss of cultural heritage and social values of the country and therefore, it can be argued that it is harmful to the society from this view point. However, the global integration and interaction of people around the world allow them to understand and study different culture and value system of various societies. Political/legal globalization and influence on the growth of T&H industry Globalisation as an integration of the various economies of the world through trade and investment is an important reason why many of the policy changes, domestic as well as international have been introduced since 1990. As an initial move, India opened up its economy to the world economy for economic integration and allowing trade and investment between countries. Important policy and political measures initiated in the wake of liberalisation and globalisation strategy in the early nineties included "scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices Act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates" (Balakrishnan, 2004). "The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. Peak tariff rates are to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by March 2002, including almost all quantitative restrictions" (Balakrishnan, 2004). These major policy changes has brought about growth in the international trade and thereby tourism and hospitality industry. This phenomenal growth might be the reason for further initiation taken by the government and authorities for the sector to improve. The role of technology as facilitator in the process of globalization and its influence on T&H Industry One of most visible factors that stimulated tourism and hospitality industry as a result of globalization is the information and communication technology (Wadia 2005). The communication has grown tremendously over the last few years. Information and communication technology has now made it possible for anyone to reach anywhere at any time (Wadia, 2005). The development of information technology can be mainly attributed to the Information Technology in India and a small portion of international tourism is accounted in the software industry. Experts from countries across the world visit India to join software companies and enjoy the fruits of the industry (Jalan, 1996). The sudden growth of the industry itself is the proof of the globalization process initiated by India government. The major technological developments in this regard include the satellite TV channels, cellular phones, broadband, Internet, and so forth. Thus, communication and developments in information technology brought by globalization has had a profound impact upon the tourism and hospitality industry in India. Summary and conclusion Globalisation has many implications on any country. These implications can be viewed from different dimensions. As one of the fast developing economies in the world, India take globalisation as an opportunity to capitalise the favourable situations generated from different countries. Tourism is one of the fast growing sectors and sources of foreign exchange in the country and as such, it is undoubtedly say globalisation has much impact upon the industry. Globalisation has made impact upon the industry both positively and negatively. The foreign exchange contribution to the economic on account of international tourism and hospitality industry is one of the instances of positive impacts. However, the country's rich culture and value system might have got tainted owing to the integration of diverse culture from different countries. The best way to look at the impact of globalisation on the tourism and hospitality industry is through the different dimensions of globalisation. This in-depth analysis of the impact of globalisation on T&H industry observes that tourism and hospitality industry is favourably affected more than unfavourable results. 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