Abstract
Tourism is an increasingly popular global activity and contributes significantly to the GDP and employment of an economy. However, its contribution to an economy is difficult to quantify as it does not fall in the system of national accounts (SNA) due to the demand-driven nature of activity. Where core national accounts cannot provide the required information, SNA suggests the development of satellite accounts within the framework, concepts and definitions of SNA highlighting the particular aspect of the economy, which in this case is tourism. Tourism Satellite Account (TSA) is the most comprehensive way to measure the economic importance of tourism in national economies. This article presents a summary of the study on India’s second TSA for 2009–10. It reveals that tourism’s direct share in India’s GDP is around 3.7 per cent and in employment is 4.4 per cent. Taking the indirect effects into account, these shares escalate to 6.8 and 10.2 per cent, respectively.
JEL Classification: L830, C670, D570
Keywords
INTRODUCTION
Tourism is an important social and economic activity in many countries. It is a key driver of socio-economic progress through the creation of jobs and enterprises, infrastructure development and the export revenues earned. 1 As an internationally traded service, inbound tourism is one of the world’s major trade categories. According to the latest data from the UN World Tourism Organisation (UNWTO), total international tourist arrivals were 982 million in 2011 2 and international tourism receipts amounted to an estimated US$ 1,030 billion worldwide. In real terms (adjusted for exchange rate fluctuations and inflation), international tourism receipts grew by 3.9 per cent, while international tourist arrivals increased by 4.6 per cent in 2011.
Measuring tourism and its contribution to the national economy is a difficult task, since tourism is not defined separately in either the standard international industry or product classifications or in the accounting framework of national accounts, which focuses on accounting of economic activities undertaken in the country according to standard international classifications. This is because tourism, unlike other sectors of the System of National Accounts (SNA), is not defined as an industry by the characteristic of the product it makes as an output, but identified by the characteristic of the purchaser demanding the products, that is, the visitor. Therefore, this special characteristic of tourism sector cannot be made explicit while compiling the national accounts according to the SNA, though tourism is an economic activity and its contribution is already included in the national accounts implicitly and thus is not separately visible in the national accounts.
In such cases, where core national accounts do not provide the required information, the SNA suggests the development of satellite accounts within the framework, concepts and definitions of SNA, but highlighting the particular aspect of the economy (in this case, tourism).
The rest of the article is structured as follows. Section 2 presents a brief description of satellite accounts in general and Tourism Satellite Account (TSA) in particular. Section 3 summarises the methodology adopted in preparing the requisite tables of the TSA. Concluding remarks present the key findings and are given in the last section of the article.
TOURISM SATELLITE ACCOUNTS
Satellite accounts help in recasting the national accounts framework in rigorously controlled structures, in order to better understand and analyse special aspects of the economy that may transcend the traditional notion of industries. It focuses on a particular area of interest such as tourism, environment, education, health, transportation and so on, but maintains a loose relationship with the national accounts, with boundaries expanded and reclassified. Satellite accounts take off from the SNA by focusing on the purpose or function of transactions. Thus, transactions in the economy are first analysed in the SNA according to their characteristics. Then, certain types of transactions (such as tourism, health care or environment) are analysed from the expenditure side. In satellite accounts, therefore, the unit of analysis to which classification is applied is not an establishment (as in national accounts), but transactions or groups of transactions.
TSAs are designed to measure goods and services associated with tourism across economies. To enable international comparison, the UNWTO developed sets of international recommendations on tourism statistics. 3 To enable international comparability of tourism statistics, countries follow the guidelines given in IRTS 2008 and TSA: RMF 2008; India’s second TSA was prepared following these guidelines and with all the 10 recommended tables, as per the availability of data.
The TSA comprises 10 tables which are the key to the economic contribution of tourism in the economy. For India, the tourism specific products and services for its TSA are given in the Table A1.
These ten tables include a detailed presentation of consumption of goods and services acquired by the tourists (tourism internal consumption) as well as the supply of industries that produce them. The overall confrontation of demand and supply of these goods and services constitutes the core of the TSA system. Besides, TSA presents the employment in tourism industries owing to the frequent strategic importance of tourism in the development of the employment policy. The investment in tourism industries and government expenditures in producing tourism-related services also form the parts of TSA and are presented as tourism gross fixed capital formation (GFCF) and tourism collective consumption. Various non-monetary indicators related to tourism form the last part of the TSA.
METHODOLOGY
The main aggregates derived from the tables are comparable with other macro-indicators relating to consumption and value added in a country. These are (i) internal tourism expenditure and internal tourism consumption; (ii) tourism direct gross value added (TDGVA); (iii) tourism direct gross domestic product (TDGDP), and (iv) other aggregates (tourism employment, tourism GFCF and tourism collective consumption). The description of these aggregates and methodology involved in deriving them is given as follows.
Internal Tourism Expenditure
Internal tourism expenditure refers to expenditure on tourism activities by all tourists within the country of reference. This comprises inbound tourism expenditure, domestic tourism expenditure and pre-trip outbound tourism expenditure.
Inbound tourism expenditure is expenditure by non-resident visitors on tourism-characteristic and tourism-connected products and services in the country of reference.
The TSA:RMF 2008 recommends this be obtained through surveys conducted at exit points. For the TSA of India, 2009–10, inbound tourism expenditure was derived from the International Passenger Survey (IPS) conducted by the Indian Statistical Institute (ISI), Kolkata. The respondents were non-resident Indians (NRIs), persons of Indian origin (PIOs) and other foreign nationals. A total of 40,672 inbound tourists (3,137 NRIs, 3,119 PIOs and 34,416 other foreign nationals) were surveyed at 13 exit points across the country. The information collected included expenditure incurred by these categories of tourists for a detailed set of items under the heads of accommodation, food and drink, transport, shopping, recreation, religious, cultural, sporting and health-related activities and other expenditures. These items of expenditure were mapped with the tourism specific products and services to arrive at inbound tourism expenditure by types of tourists and by products and services (Table A1 in the Annexure). Since the TSA was prepared for 2009–10 but the reference year for IPS was 2010–11, expenditure data were deflated for 2009–10 using the PFCE deflator.
Domestic tourism expenditure is expenditure by resident visitors on tourism-characteristic and tourism-connected products and services in the country of reference during a domestic trip. 4 TSA: RMF recommends household surveys as a source for this information. For India’s second TSA, domestic tourism expenditure was derived from the Domestic Tourism Survey (DTS) conducted by the National Sample Survey Organisation (NSSO) as part of its 65th Round of sample surveys during 2008–09. A total of 153,038 households were canvassed in this survey for information on overnight and same-day trips in the last 30 days and last 365 days and information was collected on expenditure incurred on various items, which were mapped with tourism-specific goods and services.
Further, based on the observation that the primary household surveys tend to underestimate the value of consumption expenditure, the DTS values of expenditure were corrected by applying the adjustment factor for each item. These adjustment factors were obtained by taking the ratio of PFCE expenditure and NSSO expenditure obtained from NSSO’s 66th round of survey on ‘Consumption Expenditure’. Here, too, expenditure data were inflated for 2009–10 using the PFCE deflator.
Outbound tourism expenditure is expenditure by resident visitors on tourism-characteristic and tourism-connected products and services outside the country of reference. Some part of the expenditure is incurred by outbound tourists within the country of reference, largely pre-trip expenditure. The TSA: RMF recommends the use of an entry or departure card or a specific survey at the border or household surveys to collect this information. For this study, data were collected from a survey of 9,139 outbound tourists conducted by ISI, Kolkata, which captured expenditure incurred by outbound tourists from India. Outbound tourism expenditure was estimated in the same way as inbound tourism expenditure except that inbound tourism expenditure was obtained for three categories of tourists and outbound tourism expenditure was obtained by purpose of travel.
Total internal tourism consumption and expenditure (Table A2) are at purchasers’ prices and include actual expenditure made on the acquisition of goods. The key findings of the table are as follows:
The total tourism consumption for 2009–10 is to the tune of ₹ 5.57 lakh crore. Tourism expenditure constitutes 90.3 per cent of total internal tourism consumption, while the remaining 9.7 per cent is the imputed consumption. It should be noted that although recommended by UNWTO, not many countries compute the imputed consumption due to data constraints. However, we attempted to derive this component for second TSA based on certain assumptions
5
and using whatever relevant data were available. Tourism in India is mainly driven by the domestic tourism activities. Domestic tourism expenditure accounts for as much as 78.2 per cent of the total expenditure, followed by inbound tourism expenditure, with the share of 19.8 per cent. While in per-trip value terms, domestic travel turns out to be far less expensive than international travel, the huge volume of domestic trips result in a far higher share of total domestic tourism expenditure in total at an aggregate level. Interestingly, domestic tourism expenditure turns out to be about 10 per cent of private final consumption expenditure, which means that of the total consumption expenditure incurred by households during the reference year, one-tenth was spent on domestic tourism activities. Within total tourism internal consumption, the shares of tourism-characteristic products, tourism-connected products and imputed consumption are 74.7, 15.5 and 9.7 per cent, respectively.
Tourism Direct Gross Value Added (TDGVA)
This is part of the gross value added (GVA) generated by tourism industries and other industries that directly serve visitors in response to internal tourism consumption. It is an indicator of the link between the demand for goods and services by visitors and their supply by domestic producers of tourism industries and non-tourism industries. Here, output and intermediate consumption data for each industry are broken down by product and are valued at basic and purchasers’ prices, respectively. The difference between these two values is the GVA at basic prices. The GVA is further broken down into compensation of employees, gross operating surplus of corporations, mixed income of unincorporated business and net taxes on production.
The production account was prepared using India’s Supply and Use Table (SUT) for 2009–10 specially prepared for this TSA. The tourism-specific SUT was prepared for 25 industries, of which 20 industries and products were tourism-specific industries and the rest were tourism non-specific. This account also shows the satellite rows of employment, GFCF and net capital stock (NCS) to facilitate more in-depth tourism analysis. The actual TSA Table A5 also provides product/activity level details (for TSA Table A5, refer to the report ‘Second Tourism Satellite Account for India—2009–10’).
The summation of GVA of all tourism characteristic industries, regardless of whether all their output is provided to visitors, is called Gross Value Added of Tourism Industries (GVATI). It leaves out value added from other non-tourism industries whose outputs have been acquired by visitors or by others for their benefit. The GVATI amounts to ₹ 4.43 lakh crore (sum of the GVA of industries numbered 15 to 25 in Table A5), which represents 7.2 per cent of the total estimated GVA of the economy. Similarly, total employment in these tourism industries is estimated at 2.34 crore, and accounts for 4.4 per cent of the total estimated employment of 53.55 crore.
Although GVATI is an indicator often used to measure the direct economic contribution of tourism, it is an inadequate indicator of the size of tourism, as not all the value added generated by tourism industries is served directly to visitors and value added generated by other industries also partly serves visitors.
However, it is possible to calculate the TDGVA which is the GVA generated by tourism industries and other industries that directly serve visitors in response to internal tourism consumption. To arrive at TDGVA, the production account (supply) is compared with the internal tourism consumption (demand) and the confrontation and reconciliation between domestic supply and demand takes place in the sixth table of TSA. This table is, hence, the core table of the TSA system. The total supply of goods and services by product, which includes domestic production and imports, is compared with tourism consumption and conclusions can be derived regarding the GVA attributable to tourism for each of the industries that serve visitors. The ratio between the total supply of goods and services and total internal tourism consumption is the tourism ratio.
It must be noted that TDGVA also includes part of the GVA associated with the output of other (non-tourism) industries as long as this output responds to tourism consumption. Consequently, TDGVA can be seen to be independent of the definition of tourism-characteristic products and tourism industries, a feature that enhances its usefulness as an internationally comparable measure of the economic importance of tourism.
Tourism Direct Gross Domestic Product (TDGDP)
TDGDP is the sum of the part of GVA (at basic prices) generated by all industries in response to internal tourism consumption plus the net taxes on products and imports included within the value of this expenditure at purchasers’ prices. Hence, TDGDP is estimated from TDGVA by adding taxes less subsidies on products related to tourism.
The core table, described earlier, provides the basic information that is necessary for the computation of both TDGVA and TDGDP and their components. These aggregates provide measures of the direct economic contribution of tourism in the economy of reference in the same sense as GVA of any industry does and can be expressed as shares of total GVA or of total GDP of such economy (Table A5 in the annexure).
Tourism ratios relates to tourism consumption out of the total supply of goods and services. These ratios are over 50 per cent in the case of travel-related consumer goods (70.7 per cent), railway passenger transport services (57.6 per cent), land passenger transport services (57.4 per cent), air passenger transport services (77.2 per cent), tourism related supporting services (72.4 per cent) and hotels (64.8 per cent). This means that of the total supply of these products, more than half is consumed by tourists.
It should be noted that for all the tourism-specific services, the tourism ratios and tourism shares are equal but for tourism-specific goods, these are different (Table A4). The tourism ratios for service activities are similar to tourism shares for service industries because of the relative non-existence of secondary products for service activities. However, these are different in goods as productive activity associated with goods purchased by visitors is only the retail trade activity, hence, only the associated retail trade margin generates tourism share. It is for this reason that the TDGVA is negligible for tourism-specific goods (Table A5).
Other Aggregates
The relevance of employment in tourism industries lies in the strategic importance of tourism in the development of an employment policy. Further, labour is a factor of production and is generally associated with an establishment in which, usually, various products are produced. Therefore, relating employment to a specific product or group of products of a given establishment is a complex issue in measuring tourism direct employment. Hence, the measurement of employment is limited to employment in the tourism characteristic industries and the variable used to express volume is the number of jobs or headcount of employees. 6 The share of ‘employment in tourism characteristic industries’ in total employment in the economy gives the contribution of tourism to employment (Table A6). This stands at 4.4 per cent. This is despite the fact that agriculture, in which tourism has no direct share, accounts for about 55 per cent of total employment. If agriculture is excluded, the share of tourism goes up to 9.7 per cent.
Tourism industries acquire tourism-related capital goods for the production of goods and services. These individual capital goods when aggregated over all the tourism industries provide data on the tourism GFCF 7 The GFCF and NCS by industries are presented in Table A7. The tourism GFCF is estimated to be 5.2 per cent of the total GFCF and the NCS at 4.4 per cent of the total NCS. It is observed that output per unit of NCS is much more in the case of tourism industries (1.61) as compared to that of non-tourism industries (0.60), which infer that tourism is less capital intensive. Also the table on employment reveals that tourism industries are more labour intensive.
The government provides services to the community at prices which are not economically significant, and the additional expenditures are financed from its own resources. These government expenditures 8 (including imputed expenditures mainly on the consumption of fixed capital on its fixed assets) on producing these services net of receipts from the sale of goods and services are termed government final consumption expenditure (GFCE). GFCE has two components, individual and collective, based on the consumer—households or the community as a whole. While individual consumption expenditure is part of household actual final consumption, collective expenditure becomes part of the collective (or actual) consumption of government. The TSA RMF: 2008 seeks to include the estimates of tourism collective consumption in the TSA system but considering the difficulties in collecting data on collective expenditures of government related to tourism services, this table is placed under experimental stage (Table A8). 9
Indirect Contribution of Tourism Aggregates
It is possible to estimate the direct and indirect effects of tourism consumption through the application of input-output (I-O) models (TSA: RMF 2008). The direct effects only take into account the immediate effects of the additional demand (tourism internal consumption) on production processes in terms of additional supply of goods and services, and additional value added and its components. However, the suppliers of this additional demand require additional inputs from other producers due to inter-industry linkages and those producers in turn would need additional inputs from their input suppliers. Thus, the additional demand (which generates direct effect on production process) induces a chain of activities for different factors of production (that is, inputs, labour and capital), which continues through several rounds until exhausted. This chain of effects which enables producers directly serving additional demand to do so is called the indirect effects of additional demand.
Therefore, in order to estimate the multipliers for output and employment, as also for primary inputs (imports, value added components and net taxes on products), an I-O table of 25 industries was constructed under this TSA study. Grouping these 25 industries under ‘non-tourism industries’, ‘tourism-connected industries’ and ‘tourism-characteristic industries’, an I-O table of 3×3 dimension of both ‘product by product’ and ‘industry by industry’ type, was compiled. Using these I-O tables, the multipliers for output and employment were estimated. The multipliers indicate the combined (direct and indirect) shares for one unit of final demand of the concerned product (Table A9). An output multiplier of 1.8518 means that if the final demand for tourism or the expenditure on tourism activities increases by one unit then the resultant increase in overall output would be around 1.8518 units, due to the indirect or spill-over effects of tourism.
CONCLUDING REMARKS
The study reveals that the TDGVA amounting to ₹ 234,912 crore accounted for 3.8 per cent of GVA at basic prices in the total economy. The TDGDP at purchasers’ prices, obtained after adding net taxes on products to TDGVA, amounted to ₹ 237,768, translating to tourism industry’s share of 3.7 per cent in India’s GDP. Compared to this, tourism share in India’s GDP in 2002–03 (according to the first TSA, 2002–03 10 ) was 2.2 per cent. Hence, in 2009–10, there is a gain of 1.5 percentage points in the share of tourism in nation’s GDP. This increase is due to several factors including methodological, increase in number of tourists and their per-capita tourism consumption. There was a marked increase in the number of both domestic and foreign (or inbound) tourists between the two rounds of the TSA. The estimated number of domestic tourists grew by 42.6 per cent between 2002–03 and 2008–09, while the number of foreign tourists witnessed a growth of 54.3 per cent. Also the findings reveal that per tourist expenditure grew from ₹ 601 to 1,860 for the domestic tourists and from ₹ 79,559 to 150,939 for foreign tourists.
However, it should be noted that there is an underlying difference in the methodology adopted in the preparation of the first and second TSAs of India. The first TSA for 2002–03 was based on UNWTO’s 2000 methodology, according to which tourism expenditure represented total tourism consumption while the second TSA is based on the UNWTO’s 2008 methodology, which recommended the computation of imputed tourism consumption as well apart from the tourism expenditure, together constituting total tourism consumption. Besides, 2008 methodology recommends the TSA to be prepared in consistent with the SUT framework.
With regard to employment, total employment in terms of jobs in tourism industries is estimated at 234.20 lakh out of a total of 5,355.39 lakh jobs in the country. It may be mentioned that the bulk of these jobs, amounting to 2,945.20 lakh, are in the Agriculture sector. The share of jobs in tourism industries is 4.4 per cent of total jobs in the economy. As compared to this, tourism’s share in employment in 2002–03 was somewhat higher at 4.6 per cent. However, again due to the methodological differences, the two numbers are not strictly comparable. In the first TSA, tourism industry ratios were imposed on the corresponding industry’s employment to arrive at tourism employment, whereas in second TSA, the entire workforce in tourism characteristic industries is said to constitute tourism employment (as per UNWTO recommendation).
While the UNWTO-recommended methodology does not include the measurement of any indirect or induced effects of tourism on the economy, this study attempts to calculate these using the input-output method. Based on this, the output multiplier for tourism was 1.8518, whereas the employment multiplier was 2.3256. This means that the backward linkages of tourism are strong and the tourism activity not only generates output and employment for its own sector, but also triggers production and employment in other sectors. A unit increase in tourism expenditure results in 1.8518 units increase in overall economy’s output and an increase of one job in tourism results in the generation of a total of 2.3256 jobs in the economy.
Using the multipliers, it is estimated that the share of TDGVA to India’s GVA is 7.0 per cent (with the direct share equal to 3.8 per cent and the indirect share being 3.2 per cent). The contribution of TDGDP to total GDP is 6.8 per cent (3.7 per cent direct and 3.1 per cent indirect) and to employment is 10.2 per cent (direct 4.4 per cent and indirect 5.8 per cent). Compared to this, tourism’s direct and indirect share in India’s GDP in 2002–03 was 4.8 per cent and its share in India’s employment was 8.2 per cent. The overall gain in tourism’s share in GDP in 2009–10 is to the tune of 2.0 percentage points and in employment is 2.3 percentage points. However, such gain is arrived at by comparing the headline numbers of the two TSAs, while practically speaking, as mentioned before, the two TSAs are methodologically not comparable.
There are some other countries too which measure direct and indirect share of tourism in GDP, such as Australia, Brazil and New Zealand. Their share in GDP worked out to be 5.2 per cent for Australia (latest TSA for 2010), 8.6 per cent for Brazil (2011 TSA) and 8.7 per cent for New Zealand (2010 TSA).
As far as the present study is concerned, the main contributions have been the ability to implement international methodological recommendations on TSA (as outlined in TSA:RMF 2008 of the WTO) and quantify the contribution of tourism to GDP and employment in India, despite source data constraints. Besides, the study has for the first time measured informal sector and informal employment in tourism activities and suggested steps to compile TSA tables on tourism GFCF and tourism collective consumption.
Going forward, the government plans to prepare TSAs for India on a continuous basis, every five years. This will facilitate the comparison on various parameters over time. While compiling the TSA for 2009–10, the best practices recommended in TSA: RMF 2008 were followed. Nevertheless, further improvements are possible if the source data are improved in terms of scope and quality. In particular, the tables on GFCF in tourism and other industries and tourism collective consumption by products and levels of government could be placed under a future research agenda for more clarity on conceptual issues before they are included as recommended tables for cross-country comparison. Based on the available information, these two tables have been prepared and presented in TSA 2009–10. But, for their improvement, future work could be focused on (i) identifying the types of tourism-specific fixed assets acquired by tourism and other industries and (ii) tourism investment in infrastructure. With regard to the table on tourism collective consumption, future work could be to identify collective consumption while classifying government expenditures under different purposes (COFOG classification).