Relationship between tourism in Nepal and Indian economy

This is a research in which I am currently working on .Trying to employee a regression model to find a relationship between out bound tourism of India and how does it contribute to Nepal's economy... suggestion and comments will be appreciated



The World tourism organization has fore casted India is expected to be one of the biggest sources of overseas tourists by 2020, According to the survey in 2004 India was one of the top 25 countries to spend on outbound tourism. International tourism receipts represented in 2003 approximately 6 per cent of worldwide exports of goods and services (as expressed in US$). When considering service exports exclusively, the share of tourism exports increases to nearly 30 per cent.

Tourism is the largest industry of Nepal and one of the main sources of foreign reserves and revenue .For the last few years the tourism had plunged due to geo political instability in the region, but recently after the peace accord between the Maoist and the Government, tourism industry has once again started flourishing. According to Nepal tourism board the tourist arrival in 2007 grew more than 27% in 2006 .As the result GDP grew at the rate of 2.5% in compare to -2.00% in the previous year, Which was also followed by the bearish out look of the hotel companies listed in Nepalese stock exchange . Increase in the number of tourist has increase the confidence of local business and enterprises.

This case study is to analysis what are the various economical, political and geographical factors of Nepal and its booming neighbor India that can possibly help the demand for Nepal tourism industry . Land of Himalayas Nepal is surrounded 3 sides by economical power house India , growing at Annual the rate of 8.4%. India is one of the fastest growing economies in the world and is the biggest market for Nepali tourism. Tourism demand depends on the strong economical conditions in major generating market, when economies grow level of disposable income increase and large part of the discretionary income will be spent in tourism, particular in the case of emerging economies. Price is generally regarded as one of the major variable of demand of tourist destination, and there are two element of the price .The cost of travelling to the destination and the cost of living in the destination (Martin and Witt -87).Generally CPI is use to measure the cost of living .Price is also an important factor for substitutes in the demand for out bound tourism. Gary (1966: 86 ) have pointed out that many travelers have a high elasticity of substitution among the countries they want to travel, so that higher than budgeted price for one country may result in changing to a country will lower expenses . Nepal shares an open border with India ,Citizen of both the nation do not require to hold a passport or visa while traveling across these two countries ,International standards high ways connects two countries and high frequency of flights are schedule every day between various cities in India and Nepal. Which means travelling and living cost to Indian Citizen in Nepal will be relatively low.

Second important variable for the demand for tourism in Nepal will be the foreign exchange rate between two countries. Nepal had dual currency system in late 18Th and early 19th century both Indian and Nepali currencies were used as a medium of exchange in Nepal. Till now Indian currency dominates most part of Nepal. Nepali currency is also pegged with Indian currency (1 Indian rupee = 1.6Nepali rupee).Since the exchange rate is fixed there for cost of living and cost of traveling to Nepal for Indian tourist is relatively cheaper

Third variable will be personal disposable income in India. Economist have predicted over next two decades Indian’s middle class population will grow from about 6% of the population at present to 40% of the total population and will be the world’s fifth largest consumer spender . In 2005 the private spending of Indian was about $372 billion dollar. Higher the private spending of the country higher the likelihood of travelling. Fourth important variables will be cost of travelling by surface .Since Nepal has a open border with Indian , People do not require visa to travel .

Fifth variable will be the famous religious pilgrimage sites in Nepal. Temple of Pasupathi in Kathmandu is considered one of the most scared temple for Hindus and Nepal is also the birthplace of lord Buddha . Since 80% of the population in India are Hindus .There is a high chances for people to travel to Nepal even if it is for a religious purpose . Since people with high disposable income spend more in religious purpose.