Foreign Direct Investment (FDI) and its Impact on Hotel and Tourism Services in India

Abstract

The Foreign Direct Investment (FDI) is required for a country, when domestic capital is inadequate for the purpose of enhancing economic growth. India needs substantial foreign capital inflows to achieve the economic growth and development. In an emerging economy like India, the Hotel & Tourism services contributes significantly to the country’s GDP as well as Foreign Exchange Earnings (FEE). India has significant potential to become a preferred tourist destination globally. Its rich and diverse cultural heritage, abundant natural resources and biodiversity provides numerous tourist attractions. Since 1991, Foreign Direct Investment (FDI) to the developing countries has been the leading source of external financing and has become a key component of national development strategies for almost all the developing countries in the world. Foreign Direct Investment up to 100 percent is allowed in Hotel and Tourism sector under Automatic route. The contribution of FDI in Hotel & Tourism sector is stimulating the economic growth or not, this knowledge thrust of researcher creates the interest in conducting this study. In this paper, an attempt is made to review the concept of FDI and its impact on the Hotel & Tourism sector in India. The study is based on only secondary sources of data and it covers for the period of recent ten years. The study shows a positive correlation between Foreign Direct Investment Equity inflows and Foreign Exchange Earnings (FEE) and Gross Domestic Product (GDP) of Hotel & Tourism sector in India during the period of the study.