INFLATION AND ITS IMPACT ON INDIAN ECONOMY

DECLARATION

This is to declare that I, JUHI SHUKLA (University Roll No. 200401780017)

student of M.Com. (Applied Economics) Sem IV M.Com. (Applied Economics)

Sem IV, have personally worked on the project entitled “Inflation and Its Impact on

Indian Economy”. The data mentioned in this report were obtained during genuine

work done and collected by me. The data or information obtained from primary (first-

hand sources) and any other alternative sources are absolutely acknowledged. The

result and analysis embodied during this project has not been submitted to the other

University or Institute for the award of any degree.

JUHI SHUKLA
ROLL NO. 200401780017
 ACKNOWLEDGEMENT

First and foremost am indebted to the Almighty. It provides Pine Tree State immense

pleasure to position on record my feeling and reverence to my guide and supervising

faculty Dr. Balwant Singh from Shri Jai Narayan Mishra PG College (KKC),

Lucknow for all the timely help and support rendered. But for her constant

motivation, encouragement and adept guidance during the entire course of research,

my endeavor would not have culminated in fruition. The sincerity and dedication put

in by her for the sake of my Research Report is remarkable. I would like to thank her

for the opportunity I was given to conduct my Research and further my Research

Report under his guidance. I am grateful to Head of Department for sparing his

valuable time for me on different occasions. I really appreciate all the bank employees

who provided the requisite data for my research work. It was their cooperation and

input that made this research possible. I express my gratitude to all the library staff of

Shri Jai Narayan Mishra PG College (KKC), Lucknow. Close to my heart is the

support of my dear Colleagues, family and friends. They were always there for me

with their wise counsel and sympathetic ear. I could not have done any of this without

you all. Thank you once again.

JUHI SHUKLA
ROLL NO. 200401780017
                                                           
 TABLE OF CONTENT

S. No Particular Page No.

3 Declaration iii

4 Acknowledgment iv

5 Executive Summary v

6 Introduction

7 Literature Review

9 Objective of the Study

10 Research Methodology

11 Limitations of The Study

12 Data Analysis and Interpretation

13 Findings

14 Suggestions and Recommendations

15 Conclusion

16 Bibliography
CHAPTER - I
INTRODUCTION

1
 Chapter – I
INTRODUCTION

INTRODUCTION

The recent coronavirus (COVID-19) has triggered a concern worldwide in early

January 2020, and by the end of March 2020, the outbreak has infected several people

globally (WHO, 2020). The severity of the pandemic may be assessed based on the

figures of the past epidemics such as SARS, Spanish Flu, etc. Tourism and hospitality

businesses are profoundly affected by COVID-19 that has been declared as pandemic

on 12th March 2020 (WHO, 2020). Due to the COVID-19 pandemic, the travel and

tourism industry's employment loss is predicted to be 100.08 Million worldwide

(Statista, 2020). The pandemic has not only affected economically but as well as

politically and socially (Cohen, 2012). As the number of infected cases rising

throughout the nation, and with the implementation of certain measures and

campaigns like social distancing, community lockdowns, work from home, stay at

home, self- or mandatory-quarantine, curbs on crowding, etc., pressure is created for

halting the tourism industry/business (Gretzel et al., 2020; Sigala, 2020). This change

in the current system has led to the beginning of the recession and depression, seeking

a transformational change in society. According to Liu et al. (2019), the most dynamic

sector is the tourism industry that benefits many other sectors like lodging, catering,

transportation, retail, entertainment, etc. contributing to economic growth and

recovery globally. It has been reported that tourism growth has outperformed the

world GDP growth record from the past consecutively from the year 2011–2017

(WTTC, 2018). Furthermore, it has been estimated that there is a drop of international

2
tourists of about 78%, causing a loss in export revenue of US$ 1.2 trillion and

representing the largest decline in the tourism job cuts, which is about seven times the

impact of the 9/11 incident (UNWTO, 2020). Additionally, the drop in the tourists’

demand has led to severe financial problems (Tsionas, 2020).

India is one of the developing nations known for its uniqueness in its tradition, culture

and unparalleled hospitality. It is a major destination for many international tourists,

creating several employment opportunities and generating enormous taxes (Ahmed &

Krohn, 1992). The Indian tourism industry can be divided into three major segments,

such as (i) international inbound tourism; (ii) domestic tourism; and (iii) outbound

tourism. The Indian tourism industry has created about 87.5 million jobs, with 12.75%

of total employment, thereby contributing INR 194 billion to India’s GDP

(WTTC, 2018). Moreover, the sector recorded a 3.2% growth from 2018, with 10.8

million foreign tourists arriving in India with a foreign exchange earning of USD 29.9

billion in 2019. In this regard, India ranked 8th with respect to total direct travel and

contribution towards tourism of about USD 108 billion (FICCI, 2020). Also, there is a

66.4% decline in overseas tourists’ arrivals in India in March 2020 compared to last

year (TAN, 2020). It has been estimated that there will be about 40 million direct and

indirect job losses in India, with an annual loss in revenue of around USD 17 billion

in India (FICCI, 2020; Scroll, 2020).

Tourism is a major source of revenue and employment in many countries. It is a

generator for employment, income, tax collections and foreign exchange earnings.

The tourism industry became highly competitive; hence, accurate tourism demand

forecasting is important to make an appropriate strategic and operational decision.

Strategic decisions are planning for opening attractions, modes of transport,

accommodation, and tourism promotion for which colossal investment is required. In

3
contrast, operational decisions are the number of parking areas, attendants, number of

shuttle buses, hours of service per day, and employees’ hiring. Accurate tourism

demand forecasting is a challenging task. Forecasting tourism demand help to identify

the future pattern which guides planning and policy formation. Forecasting plays a

crucial role in tourism planning (Cho, 2001). Moreover, accurate forecasting helps

managers and practitioners make appropriate decisions in policy-making, staff and

capacity utilization and management, resource management, pricing strategies, etc.

during disruption to reduce the risk and uncertainty. Hence, tourism forecasting is one

of the significant areas of research.

Many authors proposed different models and methods, such as traditional time series

models (Athanasopoulos & Hyndman, 2008; Goh & Law, 2002; Song et al., 2003;

Witt et al., 2004; Witt & Martin, 1987; Wong et al., 2006; Wong et al., 2006),

artificial intelligence models (Claveria & Torra, 2014; Tsaur & Kuo, 2011) and hybrid

models (Hadavandi et al., 2011; Shahrabi et al., 2013; Silva et al., 2019). The time-

series ARIMA model is univariate model and applicable to stationary and

homoscedastic data series. Hence, before applying the model, it is essential to identify

the pattern through various statistical tests. In contrast, artificial neural network

(ANN) predicts by mapping the input and output. It has the capability to learn, self-

organize and adapt the data pattern. ANN model does not require past statistical

information related to the data series. The major benefit of using ANN models is non-

parametric data-driven models that capture the functional relationships with the

empirical data. Unlike traditional forecasting models like ARIMA, the model can map

the linear and non-linear properties, homoscedastic or heteroscedasticity of the data

without any prior assumption. Therefore, many researchers applied the ANN model

for prediction and proved that it is a suitable model for prediction irrespective of the

4
 data pattern (Cho, 2003; Claveria & Torra, 2014; Höpken et al., 2020; Law, 2000;

Palmer et al., 2006).

Due to COVID-19, tourism is such a highly affected sector and may remain affected

in the long term, i.e. approximately more than 1.5 years. Hence, in this scenario, it is

necessary to measure the losses due to pandemic so that policies can be redesigned to

manage tourism activities. There is a fall in foreign tourists’ arrival rate by 68% from

February to March 2020 and hence fall in foreign exchange earnings (FEE) by

66.32%, which has a significant impact on the economy (Statista, 2020). Therefore,

accurate forecasting of the number of foreign tourists and FEE is crucial in managing

tourism activity. Researchers studied different forecasting models to predict the

tourism demand, i.e. both inbound and outbound tourists; however, predicting foreign

tourists’ arrival in India and its impact on the revenue in terms of FEE are scarce.

Further, no analysis has been done to measure the impact of a pandemic like COVID-

19 on tourism and its leading effect on FEE. Therefore, this paper addresses the

following key research questions:

i. What are the impacts of the black swan event like COVID-19 on Indian tourism

sector?

ii. What are the impact of COVID-19 on foreign tourists’ arrival and foreign

exchange earnings?

Specifically, the main objectives of the paper are three-fold which is as follow: (i)

predicting the number of foreign tourist arrivals, particularly in India using ANN

model, (ii) analysing the impact of COVID-19 on tourism in terms of loss and gain in

FEE, and (iii) suggesting the appropriate theoretical and managerial implications.

The rest of the paper is organized as follows. The next Section reviews the relevant

literature, including the impact of the epidemic outbreak on tourism, and forecasting

5
models for predicting the tourists demand followed by sections on the methodology

and data analysis, prediction on the number of foreign tourists arrival, impact of

COVID-19 on the tourism economy, implications of the study, limitations and future

research, and conclusion.

The world tourism industry is facing the effect of the Covid-19 pandemic. Tourists’

travel risk and management perceptions are crucial matter in their decision to travel

destinations during the ongoing uncertainty of Covid-19 epidemic. Tourists’ travel

risk and management perceptions can influence their psychological behavior for travel

to destinations [1, 2] Tourists can view their travel risk and management issues

differently due to the spread of the existing pandemic. Tourists will avoid visiting

destinations if they consider it risky [3]. Tourists’ travel risk and management are

associated with tourism destinations, which is multidimensional where the outcomes

are uncertain due to the impact of Covid-19. Therefore, it is difficult to recognize the

common risk and management dimensions for developing a theoretical foundation

based on the tourists’ risk and management perceptions and incorporating their

outcomes. However, due to having a crucial concept of travel risk during the Covid-

19 pandemic, this study has paid attention to explore and evaluate the tourists travel

risk and management perceptions associated with the tourism attractions.

The Covid-19 pandemic has ruined all the previous narratives on development.

Lockdowns at the largest scale in human history have imposed by governments

around the world to control the spread of the pandemic. The consequences of this

pandemic could change many aspects of human life and business including tourism

management as almost half of the global population adopted restrictions on movement

at an unprecedented scale. The Covid-19 is an infectious disease caused by a new

strain of coronavirus. Co stands for corona, Vi for a virus, and D for the disease. This

6
disease refers to as 2019 novel coronavirus or 2019-nCoV. The impact of the novel

Covid-19 pandemic is expected to have antagonistic results on the tourism sector, and

the economy worldwide [4]. The economic estimations are foreseeing diminished

financial development and showing negative attitudes to residents from countries

most intensely affected by the Covid-19 pandemic [5]. The Covid-19 pandemic

started at Wuhan in China in December 2019 [6, 7] and other countries in February

2020. It has various effects and countries around the world are looking for a

sustainable development approach to mitigate its negative impact. The pandemic is

calamitous for recovering the economy of every country, nonexistent the travel

industry, and social angles including long-term health issues in those affected by the

infection and losses the friends and family. The effect of Covid-19 has mental effects

[8] and it appears to be essential to identify them appropriately and address these

issues to directly control the spread of infection [6].

Societal wellbeing or safety measures through lockdowns can control the spreading of

infections [5]. However, when such safety measures are excessively strict, they can

have negative impacts on developing the tourism industry, interruption of economic

development, and increase the unemployment rate. It is reported that the business

world today is directly or indirectly impacted by different external factors such as

financial, sociocultural, global, political, and technological [4]. The changes in these

factors lead to a change in business performance in industry in the region-specific or

worldwide. The world is aware of the Covid-19 pandemic and its social outcomes

remain ambiguous [9]. Although China, the United States and other developed

countries have produced vaccines and started vaccination, most of the developing

countries are struggling for getting the vaccine for protection against the outbreak of

the Covid-19 epidemic. There is a lack of healthcare safety and security in many

7
countries regarding handling Covid-19 patients, lack of doctors, a lacuna of vaccine,

and testing facility. Covid-19 is a global phenomenon, and it may appear soon as an

established external factor in curricula on strategic management for business

performance and emerging tourism marketing.

Other factors are mostly controllable by social frameworks, and individuals [4].

Pandemics are generally uncontrollable because they appear suddenly everywhere.

The travel and tourism sector are particularly motivated by changes in external factors

and given the idea of political and financial systems. The travel industry involves

various sectors and contributes to these areas’ advancement and the global value of

tourism management. The effect of the Covid-19 pandemic on the tourism

destination, tourists’ behavior, and their preference is irrespective of district or

nationality. The earlier studies [9, 10] have confined the connection between

pandemic and tourism regarding risk. Few studies [11] analyzed the tourism

restrictions on the spread of the Covid-19 pandemic and explained how destinations

decided to react to a pandemic. Travel and tourism are one of the largest industries all

over the world [12, 13], however, despite this industry, the hospitality and tourism

industry is currently highly sensitive to significant shocks (e.g. Covid-19 pandemic).

It is crucial to investigate how the tourism industry will recover from the effect of the

Covid-19 pandemic.

The rapid transmission and high mortality rate of the Covid-19 pandemic lead to the

scientific community monitoring its spread of infection [14]. The pandemic

encourages the continuation of social quarantine and adverse financial effects. The

clinicians and researchers have expressed their concerns about the negative effects of

the Covid-19 epidemic on the health of people and behaviors [15]. Recently a few

studies discussed Covid-19 from healthcare perspectives [5, 8]. Some studies focus on

8
the risk management of the Covid-19 pandemic [16, 17]. Some researchers [18] focus

on the travel and tourism crisis while others [10] proposed the necessary procedures

that prevent potential biosecurity threats because of worldwide pandemic outbreaks.

There is a study that [19] focused on the Covid-19 pandemic and its effect on Chinese

residents’ lifestyle and travel, which leads to enlightening long-term patterns of

behavior and tourism destination. A few countries have made explicit strides in

suspending their visa on arrival strategy and initiating strict travel bans to control the

spread of the pandemic. Another research study [20] reported that the Covid-19

epidemic has carried economic collapse to Singapore, Bali, Barcelona, Rome, and

other counties that were once tourists’ attractions. The effects of this outbreak on the

travel and tourism industry in the world have been extremely debated by industry

practitioners, the tourism department of the government, and the academic

community.

Most of the countries all over the world are decided to close their borders and

postpone their airline’s services due to the Covid-19 pandemic. United Nations World

Tourism Organization reported that there is a global crisis in the tourism industry and

Covid-19 is responsible for a decline of international tourist arrivals that estimate the

losses of US$300–450 billion [19]. This is surprisingly more terrible than the effect of

SARS in 2003 [21]. The Covid-19 pandemic has affected many countries and the

global tourism industry faces terrible situations in which business has been closed,

lives have been lost, and people are on high alert for social safety. The earlier studies

[8, 9, 22, 23] indicate that the academic community timely provides research for

everyone’s benefit over the healthcare, sociologies, and hard science. Concerning this

research, the existing study aims to investigate the social impact of the Covid-19

epidemic on tourism destination and tourists’ behaviors as well as their preferences

9
during this pandemic. This investigation likewise explains how global travel and

hospitality practices are probably going to change because of the pandemic. This

study depends on the synthesis of early literature and sources of published news and

reports related to tourism management, marketing, healthcare, and tourist behavior.

Based on these, the study draws a conceptual model for empirical assessment. For the

post-Covid-19 and business recovery, these insights will assist tourism operators,

managers, marketers, and industry practitioners tailor their tourism products and

services.

10
The COVID-19 pandemic has been quite difficult for India and has significantly

affected the transport sector. Not only have new vehicle sales dropped, but so has

travel demand, as a result of stay-at-home orders and lockdowns. Before COVID and

under a pre-2019 economic slowdown scenario, ICCT’s India Emissions Model

expected vehicle sales to grow from around 26.2 million in 2018 to 27.2 million in

2019 and 28.2 million in 2020. From there we expected sales to reach over 40 million

by 2030 and over 80 million by mid-century.

Instead, new vehicle sales slowed to 21.5 million in 2019 and further to 18.6 million

in 2020—reductions of 18% and 14%, respectively. We know that post-COVID sales

will also be different from what we had envisioned, but we don’t know exactly how

these depressed sales will change in the future. Nonetheless, it’s clear that the 2020

dip in vehicle sales has the potential to leave a deep imprint on the energy use and

emissions trajectory of the road transport sector. In the previous blog in this series, I

urged researchers to aim higher in terms of thinking about the potential for reductions.

With that in mind, I’d like to explore what different post-COVID futures would mean

for emissions. (We’ll explore how much further the emissions curve can be bent over

with aggressive policy in the seventh and final blog.)

Data on travel demand reduction in India during the pandemic is hard to come by. As

travel demand and energy consumption in the sector are directly correlated, though,

we were able to estimate reduction in travel demand from road transport based on the

yearly petroleum consumption of the country and historical data on end-use

consumption of petroleum. As per these estimates, travel demand reduced by at least

11% in 2020 compared to 2019. This is only a rough estimate and the number could

likely be higher. Regardless, it depicts how much impact COVID-19 has had on the

transport sector.

11
In one future sales scenario, demand and sales could rebound quickly. The recovery

could start in 2021 and new sales could return to the 2018 level by 2024. (We aren’t

focused on the 2019 sales number here because sales had dampened due to the

economic slowdown.) We call this a “plausible or likely sales” scenario because of

India’s large, young population and fast-growing economy, both of which suggest the

demand for automobiles is more likely to remain high.

Another possibility, though, is that new sales might remain depressed for almost a

decade and only return to 2018 levels by 2028. We call this a “progressive or low-

sales” scenario, and this could happen with greater use of public transport and if

vehicle use and ownership restraint measures are implemented. Such a scenario would

almost certainly require the government to follow a green recovery path and make

significantly higher investments in improving and expanding public transport and

non-motorized transport infrastructure while also imposing stringent vehicle use

restraint measures, especially on vehicles with poor efficiency. Several of the

strategies available are detailed in Table 1, and in such a scenario we expect central,

state, and city governments to work aggressively and in tandem with each other to

formulate complementary policies that strengthen decarbonization efforts.

Table 1. Actions available to different levels of government for realization of a

progressive or low-sales scenario for new vehicle sales

Central State City

 Policies and investments for  Policies encouraging  Urban planning –

public transport improvement deployment of clean compact cities,

and expansion vehicles like battery transit-oriented

12
 development
 Improving railway’s freight
 Vehicle use and
capacity and competitiveness
ownership restraint
to promote mode shift from EVs
measures
road to rail freight  Policies and
 Better parking and
 Stringent fuel efficiency investments for
traffic management
standards for all vehicle public transport
 Pedestrian and
categories improvement and
cycling friendly
 Stringent emission standards expansion
cities
for all vehicle categories*  Measure to retire
 EV-ready by-laws
 Policies that support the high-polluting
 Ultra/low emission
adoption of electric vehicles vehicles*
zones that allow
(EVs) and other zero-emission
only non-polluting
vehicle technologies
vehicles

* Not a decarbonization measure, but critical to lower road transport related air

pollution levels

Though we think it’s likely that a progressive sales scenario could be a possibility

only if deliberate action is taken to limit dependence on automobiles and/or if people

demand clean air and climate action, it is not altogether improbable that sales may

remain slow as a consequence of economic slowdown. This has happened elsewhere,

including in Brazil and Indonesia. In such cases of economic slowdown, investments

in public services that support the most vulnerable, including in public transport and

urban planning, become that much more crucial.

13
It’s important that we find large differences between the two scenarios. As shown in

Figure 1, sales under the plausible or likely sales scenario are expected to cross the 30

million mark by 2028 and reach over 65 million by 2050. On the other hand, under

the progressive or low-sales scenario, new sales would cross the 30 million mark only

in 2032 and reach around 57 million by 2050. Under the pre-COVID and pre-2019

economic slowdown business-as-usual (BAU) trajectory, we would have reached 30

million vehicle sales by 2022.

Figure 1. Vehicle sales under the pre-COVID BAU and different post-COVID

scenarios.

In terms of the energy and emissions impact, the plausible and progressive sales

trajectories also have very different impacts. As shown in Figure 2, the plausible or

likely sales scenario would have 30% lower CO2 emissions than the pre-COVID

baseline trajectory. Under the progressive or the low-sales scenario, the reduction in

CO2 emissions would be more substantial, around 42% in 2050 compared to the pre-

COVID baseline trajectory. The savings in oil and gas consumption would be in the

14
similar range, 30% and 42%, respectively, in 2050 under the post-COVID likely sales

and low-sales scenarios.

Figure 2. CO2 emissions from the road transport sector under different pre- and post-

COVID scenarios.

The pandemic lowered emissions from many different sectors by forcing behavioral

changes that would have been hard to imagine before COVID-19. This has been a

time of great turmoil and difficulty, but there is a way to also view it as an opportunity

to re-envision our future. We could use this moment to push the boundaries with

respect to what we can achieve, and if we are to make real strides in climate change

mitigation, we must not let this opportunity slide from our hands.

15
CHAPTER - II
LITERATURE
REVIEW

16
 Chapter – 2

LITERATURE REVIEW

LITERATURE REVIEW
This paper considers two streams of literature: (1) impact of epidemic outbreak on

tourism and (2) forecasting models used for predicting tourism demand.

Impact of epidemic outbreak on tourism

Global tourism is affected by many types of disruptive events, such as terrorist attacks

like 9/11, epidemic outbreaks like SARS-CoV-2, MERS-CoV, Ebola, Swine flu, etc.

in the past (Wen et al., 2020). However, the recent epidemic outbreak (COVID-19)

originated from Wuhan, China has severely impacted almost every industry, including

Tourism worldwide (Yeh, 2020). The virus spread to all continents through air

transport and still propagates infection exponentially (Nicolaides et al., 2020). To

contain the spread, many countries completely/partially close their boarder and

cancelled all flights, and events including sports, entertainment, pilgrimages,

conferences etc. UNWTO (2020) estimated that international tourists would decline

by 1%–3% compared to 2019 rather than the forecasted 3%–4% growth. As a result,

global tourism has slowed down significantly. The number of international flights

dropping by more than half following the tourism industry temporarily laid off half of

their workforce (Gössling et al., 2020). The World Travel & Tourism Council predicts

a tourism-related loss of up to US$ 2.1 trillion in 2020 and up to 75 million jobs

(WTTC, 2020).

The travel industry, which includes airlines, hotels and restaurants, will shrink by

50% in 2020, which would mean a significant loss of jobs and revenue. According to

17
the International Air Transport Association (IATA), Airlines worldwide are expected

to lose a record of $84 billion in 2020, more than three times the loss made during the

Global Financial Crisis (The World Economic Forum, 2020). Most of the airlines are

undergrounded. Hotels are being closed due to fewer tourists and many five-star

hotels turning into quarantine facilities. Most restaurateurs see operating costs rising

further because of social distancing, hygiene, and sanitation-related costs. Therefore,

sustaining during this crisis is a challenging task for the tourism industry.

Forecasting models used for predicting tourism demand

Tourism forecasting has been an important topic of discussion and has evolved over

the decades (Liu et al., 2019; Song et al., 2019). Researchers used different

forecasting models to predict international tourism demand (Table 1). For example,

Witt and Martin (1987) used econometric models, such as Ordinary Least Square

(OLS) and Cochrane-Orcutt (CO), to predict international tourist demand. Song et al.

(2003) applied six different econometric models to forecast inbound international

tourism demand for Denmark. The models are static co-integration regression; two

error correction model (ECM); reduced autoregressive distributed lag model

(ADLM); time-varying parameter (TVP) approach; vector autoregressive (VAR);

autoregressive integrated moving average (ARIMA) model for six different origin

countries such as Germany, Netherlands, Norway, Sweden, UK and USA. Further,

they tested the forecasting accuracy of the models and ranked over the time horizon.

The traditional time series models such as VAR (Witt et al., 2004), BVAR (Wong et

al., 2006), ARIMA (Kulendran & Wong, 2005), MARIMA, SARIMA (Goh &

Law, 2002), Statistical models like regression model, exponential smoothing

(Athanasopoulos & Hyndman, 2008), Basic structural time series model (BSM) and

causal structural time series model (STSM) (Kulendran & Witt, 2003; Turner &

18
Witt, 2001), Autoregressive Moving Average with External Variables (ARMAX)

(Yang et al., 2015). Witt et al. (2004) used vector autoregressive model to forecast

inbound international tourists to Denmark to predict the foreign tourist expenditure.

They also discussed the impact of foreign tourist expenditure on employment in

Denmark. Wong et al. (2006) applied the Bayesian vector autoregressive (BVAR)

model to forecast the tourism demand for Hong Kong, compared with the VAR

model, and showed that the BVAR model outperforms the VAR model. Wong et al.

(2007) forecasted tourism demand for Hong Kong from ten different countries using

four different forecasting models: ARIMA, ADLM, ECM and VAR. They observed

that the performance of single and combined forecasting models varies according to

the origin-destination tourist flow. Goh and Law (2002) used Seasonal Autoregressive

Integrated Moving Average (SARIMA) and Multiplicative-seasonal Autoregressive

Integrated Moving Average (MARIMA) considering intervention like the bird flu

epidemic (December 1997–January 1998) in Hong Kong, Asian economic crisis and

the reversion of Hong Kong to China sovereignty and SAR administration to predict

the inbound tourism demand for Hong Kong. They proved that the SARIMA and

MARIMA model's performance outperforms the other time series models through

comparative study.

Machine and deep learning methods are more adaptable and can generate high

accurate result (Law et al., 2019; Polyzos et al., 2020). Due to their flexibility and

versatile nature, neural networks are considered powerful methods that help classify

patterns and estimate continuous variables and forecasting. Hence, it can be applied to

a data series of linear/non-linear or stationary/non-stationary type. All these properties

make the ANN model advantageous over various traditional methods, such as AR,

MA and ARIMA time-series models etc. Several researchers have used ANN model

19
for forecasting the tourist demand, consumer behaviour and demand forecasting,

segmentation and positioning analysis etc. (Bloom, 2002, 2004, 2005; Burger et

al., 2001; Sirakaya et al., 2005; Uysal & El Roubi, 1999). The major benefit of using

such a methodology is that ANN models are non-parametric data-driven models that

capture functional relationships with the empirical data. Cho (2003) investigates the

application of three forecasting techniques: exponential smoothing, ARIMA and ANN

to predict the inbound demand of Hong Kong and found that ANN is the best method,

specifically for unclear data patterns. Palmer et al. (2006) described the step-by-step

approach to design neural network (NN) for tourism forecasting. They considered

data on tourism expenditure in the Balearic Islands, Spain, from each quarter of 1986

through the year 2000 and verified that ANN is a suitable model for long-term

forecasting, as data accuracy does not affect with expanding the forecasting horizon.

Claveria and Torra (2014) predicted inbound tourism demand for Catalonia, Spain

from different countries using neural network. They verified the forecasting

performance ARIMA and self-exciting threshold auto regressions (SETAR). Law

(2000) predicted the outbound tourism demand for Taiwan to Hong Kong using a

backpropagation neural network. The author found that the backpropagation neural

network's forecasting accuracy is high compared to the regression model, time series

(Holt’s, moving average and naive) models, and feed-forward neural network models.

Höpken et al. (2020) predicted tourist arrival using a web-search index with

autoregressive approach and compare two methods: ARIMA and ANN. They found

that Google trend data increase tourist prediction performance, and ANN outperforms

the ARIMA model. Yao and Cao (2020) empirically investigated neural network

enhanced hidden Markovian structural time series model (NehM-STSM). The

20
proposed model achieves a better performance than the chosen benchmark models for

two error measures and most forecasting horizons.

Some authors used a hybrid approach to forecast tourism demand (Chen et al., 2012;

Hadavandi et al., 2011; Shahrabi et al., 2013; Silva et al., 2019). Shahrabi et al. (2013)

applied an integrated approach of genetic algorithm and fuzzy rule called Modular

Genetic-Fuzzy Forecasting System (MGFFS) to forecast Japan's tourism demand.

Further, they compared the forecasting accuracy with ARIMA, ANN, ANFIS, genetic

fuzzy system GFS and proof that the performance of MGFFS is better. Chen et al.

(2012) applied empirical mode decomposition (EMD) and backpropagation neural

network (BPN) to predict the volume of international tourist arrival to Taiwan from

Japan, Hong Kong and Macao. Further, they showed that the proposed model EDM-

BPN outperforms neural network without EDM and ARIMA model. For a detailed

review of forecasting methods, the readers can refer to Song et al. (2019) and Li and

Jiao (2020).

Underpinning theory

This study uses the concept of pathogen-stress theory [24] to evaluate the travel risk

and management perception due to the Covid-19 uncertainty and determining human

behaviors in societal issues. Some authors have [25] explored the influence of

pathogen thereat in the context of Covid-19 epidemics. The personality traits are

predicted by a parasite-stress theory of human sociality that highlights the infection

risks related to the interaction with conspecifics [24, 26]. The travel risk and

management perception refer to the risk of human-to-human transmission. The

infection risks are connected to the openness of human contact. The increased contact

with many group members implies a higher risk of human-to-human transmission.

According to this theory, when people develop in a parasite-infested environment,

21
they become less open to visitors, less curious, less exploratory and reduce their

chance of infection. This theory is not only emphasized cultural differences but also

cultural difference over space such as between different human populations.

Generalizing the concept of pathogen-stress theory, this study explores the effect of

Covid-19 epidemic and its impact on travel risk and management perceptions.

Effect of Covid-19 pandemic

Covid-19 is a new pandemic that first erupted in December 2019 in China and spreads

rapidly across the world through human-to-human transmission. Most countries all

over the world are instituting short-term travel restrictions to stop the spread of

infection which increase the concern caused by the Covid-19 pandemic on the tourism

industry worldwide [5]. Researchers must think about the previous disaster of the

2003 SARS outbreak [27] and the 2004 tsunami in Sri Lanka [28] for lessons on how

to manage the crisis from the disaster [19]. Tourists prefer an inclusive tourism

package, safety and security when travelling to popular destinations. They want to

avoid risk and crowded tourism destinations, and they may decide not to visit

destinations if their destination preferences diminished well-being after the outbreak.

The covid-19 pandemic is already brought severe concerns to the world tourism

industry and niche market. United Nation [21] reports that the recent circumstance of

the tourism sector is very worse due to the pandemic. This crisis expanded in the

world and Covid-19 pandemic easily immobilize international tourists’ emotional

stability. The impact of Covid-19 epidemic is greatly affected tourists’ travel risk and

management perception. Researchers [19] suggested the practitioners for exploring

the tourists’ travel behavior towards tourism destinations. The discussion of existing

literature evidence that there is no empirical examination that focuses on the impact of

22
Covid-19 pandemic on tourists’ travel risk and management perception. Thus, we

propose the hypothesis:

1. H1. The fear of Covid-19 pandemic affects the tourists’ travel risk and

management perception.

Tourists’ travel risk and management perception

Travel risk and management perception refer to the evaluation of a situation

concerning the risk to make travel decisions in destinations [1]. Travellers’ risk and

management perception is a key component for tourism destinations. Risk

management refers to the practice of recognizing potential risks of the travel and

tourism industry due to the current pandemic in analyzing, improvement and taking

preventive steps to reduce the risk. Many countries of the world started to recover

from the crisis of tourism events [2]. Tourists’ travel arrangement should be organized

to minimize the risk and stress of tourists. For example, tourists should purchase

insurance when they booked trips to destinations. Researchers [29] stated that the

travel and tourism industry is vulnerable against risk including crises events,

epidemics, pandemics, and other risks that challenges tourists’ safety. The previous

studies indicated that risk restricts travel is negatively affect tourism demand [30–32].

Other authors [33] found that perceived risk negatively affects tourists’ destination

perceptions. This study postulated that:

1. H2. Tourists’ travel risk and management perception have a significant impact

on risk management.

Travel risk indicates the cancellation of flights due to the tourists’ travel restrictions,

travel risk and management perceptions. The travel cancellation leads to tourists’

negative emotion, anxiety and disappointment [34]. In line with this, service delivery

or service efficiency is crucial to tourism initiative performance. Service failure could

23
lead to a negative impact on travel destinations. The previous studies indicated that

tourists’ travel risk and management perception may negatively influence tourists’

decision making [35, 36]. Professional service delivery and timely response could

reduce tourists’ travel risk and management perceptions. Studies [36] identified that

some restaurant refused to provide service delivery to Chinese people. This racial

discrimination may lead to tourists’ having an increase in travel risk and management

perceptions towards destinations. Research study [4] stated that public health crisis

can affect tourists’ dining behavior. Thus, tourist should avoid eating in restaurants

and order delivery to minimize social interaction and avoid unnecessary contact with

people during the pandemic. Therefore, this study postulated that:

1. H3. Tourists’ travel risk and management perception have a significant

relationship with service delivery.

The travel behavior of people changes at the individual level due to the Covid-19

pandemic in the globe [37]. It is difficult to change the transportation pattern in the

public areas and crowded public transits in the country. Articles [4] reported that bike

or ride-sharing services could be alternative to more crowded transit options in the

wake of Covid-19 pandemic. Social distance is important to avoid crowded areas,

thus, the availability of different transportation options within the country can help

tourists to decide to visit their desired tourism places. Another study [38] stated that

the transportation network is vulnerable to disturbance due to movement restrictions.

Research work [39] indicated that the use of public transport signifies a higher risk of

infection of Covid-19 in Budapest. This study proposed the following hypothesis:

1. H4. Tourists’ travel risk and management perception are positively related to

travel pattern.

24
The distribution channel refers to the traditional travel agencies to online agents while

purchasing tour packages, booking hotels and buying ticket [4]. Distribution channels

are the intermediaries through which a product and services pass to the end customers.

Authors [40] stated that customer behavior has a significant link with purchase

behavior, destination choice, experience sharing, and information searches.

Information technology can easily reduce an individual’s travel risk and management

in person-to-person communication [41]. For instance, people can work at home

without travelling to the office, involve with distance learning, order products and

services online, and performing banking transaction virtually. People use technology

for travel-related purposes such as booking holidays, offering instant vendor

feedback, and comparing travel destinations, which lead to reducing travel risk and

management perceptions. Therefore, we proposed that:

1. H5. Tourists’ travel risk and management perception have a significant

influence on distribution channels.

Covid-19 spreads through human-to-human transmission, thus, it is crucial to avoid

overpopulated destinations. Overpopulated destination refers to the neologism that

indicates the overcrowded people on a holiday destination. A collaborative work [42]

indicated that pathogen threats make people alert and avoid overpopulated

destination. This tendency will initiate a mind shift in people travel behavior and

reduce the tourists’ travel risk and management perception in the avoidance of

overpopulated destination [43]. It’s reported that social distancing can assist to

prevent infection of Covid-19 epidemics [44]. According to several studies [4, 45, 46]

tourism locations are plagued by overcrowded travelers, thus, tourism operators can

identify how the best way to manage tourist flows to make sure safety, well-being and

risk perception of visitors.

25
This study proposes that:

1. H6. Tourists’ travel risk and management perception have a significant impact

on the avoidance of overpopulated destinations during Covid-19 pandemic.

The Covid-19 pandemic has made people conscious of hygiene and safety. People are

concerned about their safety and hygienic need in public transports, hotels and

recreational sites [47]. To reduce the symptom of people of Covid-19 epidemics, face

masks use can be helpful for the hygiene and safety of people [4, 48]. Covid-19

pandemic have greatly affected the travel decision of tourists and their health safety

and hygiene [4]. It implies that safety and hygiene can be a significant factor for the

travel risk and management perception of tourists. Because the risk mostly belongs to

safety and hygienic including health-related issues. The potential tourists are

generally like to seek destinations’ safety and hygiene, cleanliness, established

infrastructure, and high-quality medical facilities during the Covid-19 pandemic [4].

26
CHAPTER - III
OBJECTIVES OF
THE STUDY

27
 CHAPTER – 3

OBJECTIVES OF THE STUDY

OBJECTIVES OF THE STUDY

 1. Study the measures of inflation in India.

 2.To analyse the impact of inflation in Indian economy

28
CHAPTER - IV
RESEARCH
METHODOLOGY

29
 CHAPTER – 4

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

The present study has undertaken to examine the impact of inflation on Indian

economy, and measurement of inflation. An account ofmeasuring inflationthe

Laspeyres formula is generally used. The study used secondary data from various

published reports from Economic survey of India -2019 & 2020, NITI Aayog reports,

Ministry of Statistics and Program implementation, Government of India, Reserve

Bank of India -Handbook of Statistics, World Bank and IMF reports and Experts

opinion published in leading newspapers, published articles in journals.

30
 CHAPTER - V
LIMITATIONS OF
THE STUDY

31
 CHAPTER – 5

LIMITATIONS OF THE STUDY

LIMITATIONS OF THE STUDY

This study has several limitations despite its strengths such as large sample size and a

relatively heterogeneous sample of the international tourists who visited the

destination for leisure/holiday or shopping purposes, education/conference,

healthcare, business and other purposes. This study surveyed with self-administrative

questionnaire report measures that entail potential bias assumes that participants

might be influenced by social desirability. Therefore, future study should aim to use

other measures such as opinions of focus groups, which could support more in-depth

analysis. This study employed a quantitative method that is inflexible to participants’

subjective views on the effect of Covid-19 pandemic, thus, future study is suggested

to ask qualitative assessments using in-depth interviews. The data was collected

through the online platform, which much easier for the young generations compare to

the older generations, and leads to a large number of a younger group of participants.

A limited number of items were used to evaluate the constructs of the conceptual

model and thus future studies should cover the large measurement items. The

objective of this study mainly focuses on the impact of Covid-19 pandemic on tourist

travel risk and management perception to assist the tourism industry to provide coping

strategies in the face of the tourism crisis. Thus, future study should be conducted to

investigate the factors that influencing tourists travel risk attitudes and risk

management perceptions during and after the Covid-19 epidemic. This might be

helpful for tourism managers and practitioners to pay attention to the control of

32
Covid-19 crisis, and a systematic management strategy to promote the development of

the tourism industry.

33
CHAPTER - VI
DATA ANALYSIS
&
INTERPRETATION

34
 CHAPTER – 6

DATA ANALYSIS AND INTERPRETATION

In this study, we have used SmartPLS3.0 software for testing the hypothesis

relationship among the indicators. The partial least square (PLS) method is a more

appropriate statistical technique since it can prevent specification errors and improve

the reliability of the results, as well as provide better outcomes and minimize

structural errors [54]. This method is suitable for examining the hypothesis

relationships of the study [55]. The PLS method consists of 2 steps, for example,

measurement model and structural model [56], which has been analyzed in this study.

Multivariate normality and common method variance

Structural equation modeling using the partial least square method is not related to

multivariate normality in data, because it is a non-parametric assessment instrument

[57]. It is [58] suggested that multivariate data normality can be tested using the

online tool of web power (https://webpower.psychstat.org/wiki/tools/index) to

estimate data normality. We run the web power and the result revealed that the data

set is not normal because [59] multivariate coefficient p-values were less than 0.05

[60, 61]. In social science study, common method variance is normal due to the data

collection procedures. We run [62] one-factor test [63] to evaluate the effect of

common method variance on the constructs of the study. The result of one-factor

Harman’s test revealed that common method variance is not a critical matter in this

study because the main factor explained 33.45% variance, indicating less than the

suggested limit of 50% [64].

Data analysis

35
Demographic characteristics

The majority of the respondents consisted of male (66.7) whereas female was 33.3%.

In terms of the marital status of the respondents, 59.9% was married followed by a

single (36.8%) and divorced (3.2%). The majority of the respondents had a bachelor’s

degree (57.1%) followed by a master’s degree (24.4%), a secondary school/diploma

degree 14.0, and a PhD (4.5%). The results indicated that around 87.5% of

respondents were not infected by the affected Covid-19 pandemic whereas 1.2% were

infected by Covid-19 and 11.3% of respondent do not know whether they were

infected by Covid-19 or not. In terms of travel purpose, the majority of the

respondents (39.1%) travel for leisure/holiday or shopping purposes, which followed

by education/conference (28.2%), healthcare (17.0%), others (11.3%) and business

(4.4%). The following are the percentage of age group: between 18–29 years old

(42.0%), between 30–39 years old (33.6%), between 50–59 years old (6.7%), and

above 60 years old (1.7%). The majority of the respondents were a private employee

(59.9%) followed by a government employee (30.8%), and unemployed (9.2%). The

following are the percentage for monthly income of the respondents: less than

USD2000 (74.4%), between USD2001- USD5000 (18%), between USD5001-

USD7000 (4.3%), between USD7001- USD10000 (1.6%), and above USD10000

monthly income. The majority of the respondents in this study were from Middle East

(37.2%), followed by Asia (29.3%), Africa (14.1%), Australia (9.3%), Europe (7.0%),

and America (3.1%).

Measurement model analysis

In this study, we examined two types of validity such as convergent validity and

discriminant validity to evaluate the measurement model. The convergent validity is

assessed with two major coefficients such as composite reliability (CR) and average

36
variance extracted (AVE). To measure the convergent validity, the factor loading of

each construct should be considered and compared to a threshold. Studies [55]

reported that the loading should be greater than 0.70 to measure convergent validity.

Researcher [56] postulated that the items of each factor loading lower than 0.40 is

required to consider for elimination. The findings revealed that the majority of the

indicator loadings on their corresponding latent variables are greater than 0.80 (Table

1), indicating a higher convergent validity of the model. The CR coefficient was used

to measure the construct reliability. The result showed that the value exceeded 0.80

for all latent variables, which indicates the acceptable construct reliability. The results

of AVE of all latent variables exceeds the threshold of 0.50 [56], which signifies that

the convergent validity of the measurement model is acceptable. The Cronbach’s

alpha value exceeded the cut-off point 0.70 [54], which recognizing that internal

reliability attains the acceptable level. The rho-A value exceeded that threshold 0.70

and the variance inflation factor (VIF) sowed lower than 3.3, which indicating that

there is no multicollinearity issue in the model.

37
38
Discriminant validity is the extent to which each latent variable is

distinct from all other variables in the model [56]. Researchers [55]

argued that the square root of the AVE for each variable should be

higher than all of the relationships among the variable and other

variables in the model. Table 2 showed the square roots of the AVE

for the variables along the diagonal and the correlations among the

indicators. The findings revealed that the square root of AVE is

higher than all other values in the same row and column, which

indicates that the model meets acceptable discriminant validity. We

also considered the Heterotrait-Monotrait Ratio (HTMT) to estimate

the discriminant validity of the model [65]. The results indicated that

HTMT is lower than 0.90, which indicating that the discriminant

validity meets the acceptable level [66].

39
Structural model analysis

The model’s predictive accuracy was estimated based on the

explained variance portion (R2), whereas the R2 value of travel risk
and management perceptions, risk management, service delivery,
transportation patterns, distribution channels, avoidance of
overpopulated destinations, and hygiene and safety were 0.628,
0.553, 0.521, 0.352, 0.668, 0.523, and 0.454 respectively. Based on
[67], a non-parametric bootstrapping method was used to test the
hypothesis relationships. The findings revealed that the effect of
Covid-19 pandemic has significant impact on travel risk and
management perceptions (β = 0.727, p < 0.01), and tourists’ travel
risk and management perception has significant impact on risk
management (β = 0.743, p < 0.01), service delivery (β = 0.470, p <
0.01), transportation patterns (β = 0.481, p < 0.01), distribution
channels (β = 0.261, p < 0.01), avoidance overpopulated destinations
(β = 0.472, p < 0.01), and hygiene and safety (β = 0.312, p < 0.01),
thus, hypothesis H1-H7 are accepted (Table 3). The effect size was
estimated using f2 values. Cohen (2013) [68] reported that f2 ≥
0.02, f2 ≥ 0.15, and f2 ≥ 0.35 present small, medium, and large effect
sizes respectively. The findings revealed that hygiene and safety (f2 =
0.365), transportation patterns (f2 = 0.356), and avoidance
overpopulated destinations (f2 = 0.352) have a high effect size,
whereas service delivery (f2 = 0.283), risk management (f2 = 0.236),
and ravel risk perception (f2 = 0.356) have a medium effect size but
distribution channels (f2 = 0.073) have a small effect size. The
Q2 values for travel risk and management (0.349), risk management
(0.350), service delivery (0.160), transportation pattern (0.166),
distribution channel (0.036), avoidance of overpopulated destination
(0.141), and hygiene and safety (0.132) were all larger than zero [69],
indicating a predictive relevance of the construct.

40
With respect mediating effects, the findings revealed that travel risk

and management perception mediates the effect of Covid-19

pandemic on risk management (β = 0.540, t = 9.518, p < 0.01),

service delivery (β = 0.341, t = 4.993, p < 0.01), transportation

patterns (β = 0.350, t = 5.325, p < 0.01), distribution channels (β =

0.189, t = 2.688, p < 0.01), avoidance overpopulated destinations (β

= 0.343, t = 5.612, p < 0.01), and hygiene and safety (β = 0.267, t =

3.869, p < 0.01), therefore H8a-H8f are accepted (Table 4).

In this study, we aimed to evaluate the psychometric properties of the

Covid-19 pandemic, a newly developed scale designed to measure
the aspect of international tourists’ travel risk and management
perceptions and its social outcomes. The results of the structural
model assessment revealed the hypothesis relationships, which
indicated that the Covid-19 pandemic has a relationship with travel
risk and management perceptions. It implies that due to the spread of

41
the Covid-19 pandemic across the globe, the majority of the countries
were set up short-term travel limits to control the mass panic. By
conducting a review of the previous study indicated that there is a
relationship between perceived risk for disease-related factors and
Covid-19 pandemic [13].

The existing study results identified that the effect of the Covid-19
pandemic has greatly affected risk management, service delivery,
travel pattern, distribution channel, avoidance of overpopulated
destinations, and hygiene and safety through the tourists’ travel risk
and management perceptions. The tourists believe that Covid-19
pandemic has created travel risk and management perception and
reduce their travel plant to destinations. Data analysis of this study
specifies that tourists’ travel risk and management perception is
greatly associated with risk management. In service research the
Covid-19 pandemic context, risk management has been marked as a
significant factor affecting an individual’s belief about controlling
threats of a pandemic. The previous study [4] supported that tourists’
behavior can lead to risk management for destination infrastructure
and medical facilities, destination image, and trip planning.

The result highlight that travels risk perception is associated with

service delivery. This finding is related to [70] which found that there
is a significant relationship between Covid-19 pandemic and service
delivery. Tourists can avoid eating and drinking in restaurants. There
is an alternative solution for people who can order delivery or takeout
food to minimize interpersonal interaction. This study expands the
existing knowledge by examining the effect of travel risk and
management perception on travel pattern. This result is related to [4]
who reported that travel pattern can lead to independent travel or
small group tours, less group dining, promote destinations
experiencing under tourism, and diversity such as novel outdoor
activities, smart tourism, and nature-based travel. The findings
indicated there is a positive association between travel risk and
management perception and distribution channels. It infers that
distribution Chanel can encourage people for nature-based travel and
smart tourism to reduce the travel risk and risk management

42
perception during the Covid-19 pandemic. some researchers have
reported that people can use technology for travel-related purposes
to reduce travel risk and risk management perception [9].

The empirical results indicated that tourists’ travel risk and

management perception is greatly associated with the avoidance of
overpopulated destinations. The effect of Covid-19 pandemic
spreads through human-to-human transmission, thus, avoidance of
overcrowded destinations can be an alternative solution to reduce
infection [44]. The overpopulated destinations can be minimized by
using a short-term strategy of imposing travel restrictions for certain
attractions destinations. Data analysis point out that the travel risk
and management perception have a positive impact on hygiene and
safety, which corresponds well with a previous study [4] which
indicated that travel risk and management perception has greatly
affected tourists’ travel decision and their perceptions of hygiene and
safety due to the spread of Covid-19 epidemic. In the context of
service research, hygiene and safety judgments have been marked
as an important construct affecting people’s safety and security
towards the service firm or customers’ purchase intention of goods
and services offered by the firms or service organizations. Tourists
can purchase travel insurance when booking trips to confirm
coverage in case of illness including Covid-19. Usually, the potential
tourists are likely to express their interest in destinations’ hygiene,
safety, security, cleanliness, avoidance population density, and
medical facilities when they decide for travelling to destinations.

43
The foreign exchange earnings (FEE) from
tourism is one of the major revenue source
for the Government of India. The FEE is the
revenue generated by inbound foreign
tourists, and decrease in foreign tourists’
number leads to reduce FEE. The entire
world is affected by COVID-19, including
India. Following the border closure,
cancellation of international flights, and a
series of lockdowns, the tourist’s arrival rate
in India has been highly affected. To show
the impact of COVID-19 on FEE, a
comparative analysis has been done. Here,
it has assumed that the effect of COVID-19
will remain until next year. The FEE
depends on the arrival of the number of
tourists and exchange rate. To analyse the
impact, the monthly data related to number
of tourists, FEE from tourism and exchange
rate are collected from 31st January 1993 to
31st March 2020 from CMIE
(economicoutlook, 2020).
The scatter plot (Figure 6) describes the
high correlation between foreign tourists’

44
arrival and foreign exchange earnings, and
the calculated correlation coefficient is
0.9718. It signifies that both are highly
correlated. Similarly, Figure 7 depicts the
correlation between exchange rate earnings
and foreign exchange earnings, and the
calculated correlation coefficient is 0.8570.
This signifies that both are highly correlated.
Thus, the arrival of the number of foreign
tourists and the exchange rate are taken as
input to predict the FEE and to measure the
impact of COVID-19.
Figure 6. Correlation between the number of
tourists arrived and foreign exchange
earnings.

45
Display full size

Figure 7. Correlation between the number of

tourists arrived and foreign exchange
earnings.

46
Display full size

There is a positive change in the year-to-

year arrival rate of foreign tourists in India,
as shown in Figure 8. However, it has
decreased by 6.63% in February 2020 and
further decreased by 66.42% in March.
Figure 8. Change in the arrival of number of
foreign tourist year-to-year.

47
Display full size

If the monthly data are compared, a

negative change can be observed in Figure
9 from January to March 2020. It means the
number of tourists decreases by 67.66%. It
is because the COVID-19 virus was first
identified on 31st December 2019 in China,
and WHO declared a pandemic on
11th March 2020. Hence, there is a need to
analyse impact of COVID-19 on arrival of
foreign tourists in India in subsequent
months and its impact on FEE until next
year. Next, to analyse the impact of COVID-
19 on FEE, we perform comparative
analysis.
Figure 9. Change in the arrival of number of
foreign tourist month- to-month.

Display full size

48
A comparative study is carried out to
measure total FEE from tourism with and
without the COVID-19 situation. For this
purpose, monthly FEE values for the year
2020–2021 have been predicted considering
the number of tourists and exchange rate as
the input. Before applying forecasting model
for prediction, the past pattern of the
exchange rate and FEE has been analysed.
In methodology and data analysis section,
we already predicted the number of tourists.
Next, we analyse the pattern for the
exchange rate and FEE.
The time series plot (Figure 10) and the
ACF plot (Figure 11) represent that
exchange rate is non-linear and non-
stationary. Similarly, from Figures
12 and 13, it can be concluded that the FEE
is non-stationary. Further, for stationarity
check, the unit root tests such as ADF test,
PP test and KPSS are conducted for both
the data series at 5% significance level.
From the test, we found that exchange rate

49
and foreign exchange earnings follow non-
stationary patterns (Table 4).
Figure 10. Time series plot for exchange
rate (Rupees per US dollar).

Display full size

Figure 11. ACF plot for exchange rate

(Rupees per US dollar).

Display full size

50
Figure 12. Foreign exchange earnings (in
US dollar Million).

Display full size

Figure 13. ACF plot for foreign exchange

earnings.

Display full size

Table 4. Summary of unit root test for

foreign tourists arrival.
51
CSVDisplay Table

From Table 4, it is verified that the FEE and

exchange rate are non-linear and non-
stationary. The foreign tourists’ arrival
pattern is non-linear and non-stationary
(Table 2). Hence, the ANN model has been
used to predict FEE considering the number
of tourists and exchange rates as input. Out
of 328 months of data, 93% of data points
are considered training data set to train the
model and rest 7% data, i.e. 24 months, are
considered testing data sets. After
successful training of the ANN model, the
optimal model parameter settings obtained
are l = 2, m = 2 and n = 1, the η = 0.07, α = 
0.1, goal = 0.001 and epchos=13000. Using
these model parameter settings, the testing
data is used to predict 24-months FEE, and
the forecast error i.e. MAPE is 10.24. The
model’s fitness is 97.976%, as shown
in Figure 14, which signifies the ANN
model's fitness.
Figure 14. ANN model fitness for prediction
of foreign exchange earnings.

52
Display full size

We generated four scenarios to analyse the

impact of COVID-19 on tourism in terms of
FEE. These scenarios are:
Scenario 1 – This is the normal situation
where the monthly forecasted FEE value
depends on the previous year’s actual
exchange rate and the number of tourist
data from 31st January 1993 to 31st March
2020 collected from CMIE
(economicoutlook, 2020).

53
Scenario 2 – In this scenario, the monthly
FEE is forecasted considering monthly
forecasted number of tourist and exchange
rate (Longforecast, 2020)
Scenario 3 – Due to COVID-19, there is a
decrease in tourists from February to March
2020, approx. 68% (Figure 9). Hence, there
is a continuous decrease in arrival of
number of tourists. For example, the
predicted number of tourists in April (from
methodology section) is reduced by 68% to
estimate the number of tourists in May 2020.
Similarly, it has been done for rest of the
months to predict the tourist arrival. Using
this estimated number of tourists and
forecasted exchange rates, the monthly FEE
is predicted.
Scenario 4 – In this scenario, forecasted
arrival of the number of tourist value is
reduced by 68%. For example, forecasted
number of tourists for August is
1078112.778 (from methodology section);
hence it reduced by 68% i.e. 344996.0891.
Likewise, it has been done for rest of the

54
months. Using this estimated number of
tourist and forecasted exchange rates, the
monthly FEE is predicted.
Using the optimal parameter settings
in Table 4, the monthly FEE is predicted
considering scenario 1, scenario 2 and
scenario 3 and described in Table 5. From
the table, it can be observed that lockdown
has a high impact on the FEE.
The actual arrival of tourist and exchange
rate data from 31st January 1993 to 31st
March 2020 has taken as input for ANN
model to predict the next 14 months (August
2020 to September 2021) FEE under the
normal situation, as represented in
scenario1 (Table 5). Scenario 2 of Table 5 listed the
monthly forecasted FEE earnings under
normal situation considering the tourist and
exchange rate's predicted arrival rate. Table
5 shows that the predicted total FEE for

scenario 1 and scenario 2 is USD 31325.52

million, and USD 32053.01 million, i.e. the
difference is 2.32%. It signifies the fitness of
selected ANN model, i.e. the predicted FEE

55
is very close by considering actual or the
expected arrival rate of tourist and exchange
rate. Table 5, scenario 1 and scenario 2 confirm
that Indian tourism could have earned at
least USD 31325.52 million from August
2020 to September 2021 if there was no
COVID-19 situation. Scenario 3 describes
the monthly forecasted FEE considering
COVID-19 situation, i.e. continuously falling
in the arrival rate of tourists by 68% from the
previous month and hence predicted total
FEE is USD 1790.53 million. Scenario 4, the
monthly forecasted arrival rate of tourists
reduced by 68% and the exchange rate is
taken as input to forecast FEE. It has
assumed that if Indian tourism industry will
somewhat manage the tourist activities and
foreign tourists will come to India but with
less by 68% from the predicted value.
Scenario 4 describes that if tourism activities
are managed, and tourists come to India,
the FEE would be USD 13351.07 million.
Comparing all four scenarios, we conclude
that if the tourism activities are not managed
well, the FEE falls below USD 1790.53

56
million and may be lost entirely. If it can be
managed at some level, then the FEE value
will be at least USD 13351.07 million.

57
CHAPTER - VII
FINDINGS

58
 CHAPTER – 7

FINDINGS

FINDINGS

The findings of this study indicated that Covid-19 has affected tourists’ travel risk and

management perceptions and its impact on risk management, service delivery,

transportation patterns, distribution channels, avoidance of overpopulated

destinations, hygiene and safety. Tourists believe that Covid-19 pandemic has created

tourists’ health anxiety and reduce their travel plans for destinations. These findings

may help policy-makers and healthcare operators to manage maladaptive levels of

concern due to Covid-19 pandemic, and to know who is more inclined to react

unpleasantly towards the Covid-19 pandemic. Health practitioners can improve

educational interventions while targeting international tourists for travel destinations.

Tourists are worried about the spread of Covid-19 pandemic on their travel activities

and travel-related preferences in the post-pandemic period. With the significant effect

of Covid-19 pandemic, this study contributes key insights to assist tourism

policymakers and practitioners improve effective strategies to enhance tourists’

confidence after facing health risk crisis and travel risk and management perception

towards travel destinations. The travel movement has become more selective,

therefore independent travel and health tourism are crucial. Tourists can take fewer

trips but spend longer in their picked destinations. These patterns will reduce the

negative effects of the travel industry and lessen tourists’ travel risk and management

perceptions. Based on the tourists’ travel risk and management perceptions and travel

59
recuperation systems, travel attributes can move in the present due to the spread of

Covid-19 epidemic.

The disaster of Covid-19 pandemic teaches us not to visit overpopulated destinations

and those people suffering from overcrowded destinations, there is a necessity to

evaluate their travel planning and improvement to ensure sustainability. As tourists

prefer quiet destinations for their tourism activities due to the Covid-19 pandemic, the

global travel and tourism industry could benefit by paying attention to these craving.

Due to these predicted changes in tourist behavior, the world tourism industry entails

close academic attention. The travel and tourism industry is a fundamental part of the

global economy, liable for a large number of occupations and billions of dollars in

profit. Therefore, travel and tourism industry practitioners and policymakers should

reevaluate tourists’ behavior, travel industry policies, regulations, tourism operators’

market, and tourism product development to promote continuous sustainability. The

existing global health crisis has an unprecedented impact on the travel and tourism

industry due to the spread of Covid-19 pandemic.

Tourists’ travel risk and management perceptions and their impacts on the tourism

market or society (e.g. risk management perception, service delivery, transportation

patterns, distribution Channels, avoidance of overpopulated destinations, hygiene and

safety), need a top to bottom investigation to empower the tourism industry experts,

and policymakers to build up a more adjusted industry. Tourists’ travel risk and

management perceptions in the tourism industry will likewise prompt the

development of new tourism markets that academics and tourism operators can

investigate together. The findings of the existing empirical study are likely to shape

theories on tourists’ travel risk and management perceptions, tourists’ behavior,

marketing and management, both in the travel and tourism industry explicitly and in

60
more extensive fields in general. The spread of Covid-19 flare-up has carried critical

effects on society and industry. The travel and tourism policymakers and

academicians should consider this pandemic tragedy and how it will advise tourism

industry practices. The potential tourists concern about how they travel to

destinations; thus, tourism practitioners should consider the strategies that mitigate the

spread of a pandemic, public health crises, and ponder a plan that carries positive

changes to the travel industry following this pandemic. For example, tourists should

be needed to buy travel insurance when booking trips to guarantee coverage if there

should be an occurrence of sickness, including a post-covid pandemic. Both

international and domestic tourism needs to stress safety and health measures, and any

tourism activities that make tourists feel safer to travel destinations and reduce their

travel risk and management perception. The impact of Covid-19 pandemic should be

considered within a global community. The spread of Covid-19 epidemic will have

greater psychological, sociological and financial impacts if it is not eliminated quickly

across the world. While society can recuperate effectively from financial interruption,

including in global travel and tourism activities, following Covid-19 pandemic, the

sociological and mental effects will be more stable. People should explore the current

post-covid pandemic scene cautiously and sympathetically.

61
CHAPTER - VIII
SUGGESTIONS
AND
RECOMMENDATIONS

62
 CHAPTER-8

SUGGESTIONS AND RECOMMENDATIONS

SUGGESTIONS AND RECOMMENDATIONS

1. High and persistent inflation is a key macroeconomic challenge facing India.

Further increases in the policy rate will be necessary to tackle high inflation and

inflation expectations.

2. If external pressures from global financial market volatility resume, rupee

flexibility should be the first line of defense, complimented by use of reserves,

increases in short-term interest rates, actions on the fiscal front, and further easing of

constraints on capital inflows.

3. Further fiscal consolidation is needed. Tax and subsidy reforms will be required to

durably lower fiscal imbalances.

4. Enhanced financial sector supervision, better monitoring of banks’ credit quality,

and improved information on corporate vulnerabilities will be needed as a basis for

tackling rising corporate and financial sector strains.

5. Addressing supply bottlenecks and structural challenges—particularly in the

agriculture and power sectors and in the pricing and allocation of natural resources

(including coal, natural gas, and fertilizers)—will be essential to achieve faster

growth, job creation and poverty reduction.

63
CHAPTER - IX
CONCLUSION

64
 CHAPTER-9
CONCLUSION

CONCLUSION

The tourism sector has dramatically affected by the widespread of COVID-19 and

may remain for a longer time. The arrival of foreign tourists to India from different

parts of the world has reduced by 68% in March 2020 compared to the previous

month. It has a great impact on revenue generated from tourism in the form of FEE. A

suitable forecasting model can help in strategic and operational decision-making.

Hence, this study has predicted the number of foreign tourists using the ANN model

with respect to COVID-19 outbreak. Also, the FEE has been predicted using the

number of tourists and exchange rates. Further, to analyse the impact of COVID-19,

four different scenarios are generated, and impact has been measured through

predicting FEE.

Our findings suggest that if the tourism sector and policies are not restructured, then

the FEE will fall below USD 1790.53 million and maybe entirely lost. If it is managed

at some level though reforming policies, then the FEE value will be at least USD

13351.07 million.

In this paper, we make three contributions as well as novelties. Firstly, a well

understanding of the mutual interplay between the COVID-19 pandemic and the

tourism sector is well explained through a novel approach. Secondly, an enriching

contribution is made by predicting foreign tourist arrivals and FEE with the number of

foreign tourists and exchange rates (monthly data) as an input to the ANN model.

Finally, a decision has been proposed for the various stakeholders of the tourism

65
industry to help recover the sector from the current scenario, which is quite novel.

Consequently, the findings presented in this paper will help the stakeholders and the

policymakers facilitate strategic and operational planning based on the forecasted

value. As per the study, FEE is reduced because of foreign tourists’ fewer arrivals in

this pandemic outbreak. Therefore, instead of investing more in adding new resources,

policymakers and stakeholders can think about making the existing resource more

efficient and effective.

66
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