The relationship between tourism demand and economic growth in India: a comparative analysis of VECM and ARDL

This study examined the relationship between tourism demand and economic growth in
India from 1990 to 2019 using VECM and ARDL models to capture long- and short-run
dynamics. Structural breaks in 1994 and 2014, detected via Zivot–Andrews and Bai–
Perron tests, account for policy shifts, including post-liberalization adjustments and
the Make in India initiative. VECM results reveal multiple long-run cointegrating
relationships among tourist arrivals (TA), GDP, FDI, and HDI, with rapid convergence
to equilibrium. In the short run, FDI and HDI significantly affect tourism demand,
while GDP shows a limited immediate impact. ARDL results confirm HDI as the
strongest long-term determinant, alongside positive contributions from GDP and FDI.
Structural break dummies indicate that policy and institutional reforms temporarily
influenced tourism flows. Overall, findings support a development-led tourism
perspective, emphasizing human capital, income growth, strategic FDI, and reforms as
drivers of sustainable tourism expansion in India.