Economic growth and the well-being of many emerging economies are closely tied to global exports. However, the emergence of COVID-19 brought about significant ramifications, primarily due to lockdown measures that exerted substantial stress on the tourism sector, a key driver of the Indian economy. Using a full-fledged dynamic stochastic general equilibrium (DSGE) framework that incorporates all the key sectors, we analyse the impacts of COVID-19 on the Indian tourism sector. Findings reveal subdued exports, national income, imports and investments, while transfer payments, government bond issuance and consumption exhibited increasing trends. All in all, results hailing from our model are congruous with the economic dynamics which prevailed in India. Policy-wise, there is a need to diversify the exporting arm of the Indian economy to bolster its resilience against any similar future shock. In order to reduce the Indian economy’s susceptibility to future crises like COVID-19, the suggestion from this study for policymakers is to strengthen sectors of the economy not reliant on tourism.
AbbasJ., MubeenR., IoremberP. T., RazaS., & MamirkulovaG. (2021). Exploring the impact of COVID-19 on tourism: Transformational potential and implications for a sustainable recovery of the travel and leisure industry. Current Research in Behavioral Sciences, 2, 100033.
2.
AdeizaA., OyeQ. E., & AlegeP. O. (2022). The macroeconomic effect of COVID-induced economic policy uncertainty in Nigeria: A DSGE approach. African Journal of Economic and Management Studies, 14(1), 106–120.
3.
Al-SulaitiI., AbbasJ., Al-SulaitiK., & ShahS. A. R. (2023). Resetting the hospitality redux through country-of-origin effects: Role of tourism, culture, transportation and restaurants selection in Arab countries. In Country of origin effects on service evaluation (1st ed., pp. 193–218). Qatar University Press. https://doi.org/10.1016/qu.2023.100011
4.
Al-SulaitiK., AbbasJ., & Al-SulaitiI. (2023). Tourists’ online information influences their dine-out behaviour: Country-of-origin effects as a moderator (1st ed., pp. 1–20). Qatar University Press. https://doi.org/10.1012/qu.2023.100007
5.
Balsalobre-LorenteD., DrihaO. M., & SinhaA. (2020). The dynamic effects of globalization process in analysing N-shaped tourism led growth hypothesis. Journal of Hospitality and Tourism Management, 43, 42–52.
6.
BusatoF., ChiariniB., CiscoG., FerraraM., & MarzanoE. (2020). Lockdown policies: A macrodynamic perspective for COVID-19 (SSRN scholarly paper no. 3671251). https://doi.org/10.2139/ssrn.3671251
7.
CalvoG. A. (1983). Staggered prices in a utility-maximizing framework. Journal of Monetary Economics, 12(3), 383–398.
8.
ChopraM., & MehtaC. (2022). Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial, the US subprime and the Eurozone debt crisis. Journal of Asian Economics, 79, 101450.
9.
ChristouP. A., & PericleousK. (2023). Domestic tourism and the domestic tourist experience. Tourism: An International Interdisciplinary Journal, 71(4), 659–676. https://doi.org/10.37741/t.71.4.1
10.
DashS. B., & SharmaP. (2021). Reviving Indian tourism amid the COVID-19 pandemic: Challenges and workable solutions. Journal of Destination Marketing & Management, 22, 100648.
11.
De La PeñaR., & GarcíaI. (2023). Untangling crises: GFC and COVID-19 through the lens of a DSGE model. Latin American Journal of Central Banking, 4(2), 100091.
12.
DixitA. K., & StiglitzJ. E. (1977). Monopolistic competition and optimum product diversity. The American Economic Review, 67(3), 297–308.
13.
FangJ., CollinsA., & YaoS. (2021). On the global COVID-19 pandemic and China’s FDI. Journal of Asian Economics, 74, 101300.
14.
Faria-e-CastroM. (2021). Fiscal policy during a pandemic. Journal of Economic Dynamics and Control, 125, 104088.
15.
GaliJ., & MonacelliT. (2008). Optimal monetary and fiscal policy in a currency union. Journal of International Economics, 76(1), 116–132.
16.
GhoshS., GopalakrishnanP., & SatijaS. (2019). Recapitalization in an economy with state-owned banks—A DSGE framework. University Library of Munich.
17.
GOI. (2021). India Tourism Statistics. https://tourism.gov.in/sites/default/files/2022-09/India%20Tourism%20Statistics%202021%20%281%29.pdf
18.
GoyalA., & KumarA. (2022). News, noise, and Indian business cycle. Bulletin of Economic Research, 74(2), 503–538.
19.
HashimzadeN., & ThorntonM. A. (2021). Handbook of Research methods and applications in empirical microeconomics. Edward Elgar Publishing.
20.
JaffarA., RehmanS. U.AldereaiO., Al-SulaitiK. I., & ShahS. A. R. (2023). Tourism management in financial crisis and industry 4.0 effects: Managers traits for technology adoption in reshaping, and reinventing human management systems. Human Systems Management, 43(2), 1–18.
21.
JaipuriaS., ParidaR., & RayP. (2021). The impact of COVID-19 on tourism sector in India. Tourism Recreation Research, 46(2), 245–260.
22.
JuniorC. J. C., & Garcia-CintadoA. C. (2021). Rent-seeking in an emerging market: A DSGE approach. Economic Systems, 45(2), 100775.
23.
KaulH., & GuptaS. (2009). Sustainable tourism in India. Worldwide Hospitality and Tourism Themes, 1(1), 12–18.
24.
KaushalV., & SrivastavaS. (2021). Hospitality and tourism industry amid COVID-19 pandemic: Perspectives on challenges and learnings from India. International Journal of Hospitality Management, 92, 102707.
25.
Kordej-De VillaŽ., & SlijepčevićS. (2022). Impact of COVID-19 on Croatian island tourism: A study of residents’ perceptions. Economic Research-Ekonomska Istraživanja, 36(2). https://doi.org/10.1080/1331677X.2022.2142631
26.
KumarA. (2023). A basic two-sector new Keynesian DSGE model of the Indian economy[MPRA paper].
27.
KumarA., MallickS., & SinhaA. (2021). Policy errors and business cycle fluctuations: Evidence from an emerging economy. Journal of Economic Behavior & Organization, 192, 176–198.
28.
LiX., DonglingW., BaigN. U. A., & ZhangR. (2022). From cultural tourism to social entrepreneurship: Role of social value creation for environmental sustainability. Frontiers in Psychology, 13, 925768. https://doi.org/10.3389/fpsyg.2022.925768
29.
LiuQ., QuX., WangD., AbbasJ., & MubeenR. (2022). Product market competition and firm performance: Business survival through innovation and entrepreneurial orientation amid COVID-19 financial crisis. Frontiers in Psychology, 12, 790923. https://doi.org/10.3389/fpsyg.2021.790923
30.
López SteinmetzL. C., SisonM., ZhumagambetovR., GodoyJ. C., & HaufeS. (2024). Machine learning models predict the emergence of depression in Argentinean college students during periods of COVID-19 quarantine. Front. Psychiatry, 15, 1376784. https://doi.org/10.3389/fpsyt.2024.1376784
31.
Lubowiecki-VikukA., & SousaB. (2021). Tourism business in a VUCA world: Marketing and management implications. Journal of Environmental Management and Tourism, 12(4), 867–876. https://doi.org/10.14505//jemt.v12.4(52).01
32.
MamirkulovaG., MiJ., AbbasJ., MahmoodS., MubeenR., & ZiapourA. (2020). New Silk Road infrastructure opportunities in developing tourism environment for residents better quality of life. Global Ecology and Conservation, 24, e01194.
33.
Ministry of Finance. (2021). Steps taken by government to ameliorate impact of COVID-19 pandemic on Indian economy. https://pib.gov.in/PressReleasePage.aspx?PRID=1696278#:~:text=Structural%20reforms%20were%20also%20announced,of%20Industrial%20Land%2F%20Land%20Bank
34.
NandiA. (2019). Fiscal deficit targeting alongside flexible inflation targeting: India’s fiscal policy transmission. Journal of Asian Economics, 63, 1–18.
35.
NandiA. (2020). Indian fiscal policy: A DSGE primer. The Journal of Developing Areas, 54(2), 179–200.
36.
RahmanM. H., VoumikL. C., NafiS. Md., & ZimonG. (2023). Effects of tourism and other macroeconomic variables on women’s employment in agricultural, industry and service sectors: Evidence from African countries. Current Issues in Tourism, 27(14), 2287–2307.
37.
RamlallI. (2024). Modeling the impact of COVID-19 on the tourism sector in Mauritius: A dynamic stochastic general equilibrium analysis. Annals of Tourism Research Empirical Insights, 5(2), 100130.
38.
SakawaH., & WatanabelN. (2022). Impact of the COVID 19 outbreak on stock market returns: Evidence from Japanese listed tourism firms. Applied Economics, 54(46), 5373–5377. https://doi.org/10.1080/00036846.2022.2044996
39.
SchumacherJ., KühneL., BrüssermannS., GeislerB., & JäckleS. (2024). COVID-19 isolation and quarantine orders in Berlin-Reinickendorf (Germany): How many, how long and to whom?PLoS ONE, 19(3), e0271848. https://doi.org/10.1371/journal.pone.0271848
40.
ShahS. A., & GargB. (2023). Testing policy effectiveness during COVID-19: An NK-DSGE analysis. Journal of Asian Economics, 84, 101577.
41.
SharmaS., & BeheraH. (2022). A dissection of Indian growth using a DSGE filter. Journal of Asian Economics, 80, 101480.
42.
TanH., LiuJ. & ZhangY. (2024). Effects of COVID-19 vaccine safety framing on parental reactions. PLoS ONE, 19(4), 0302233. https://doi.org/10.1371/journal.pone.0302233
43.
The Economic Times. (2022). 21.5 million people in tourism sector lost their jobs since COVID-19 outbreak: Govt. https://economictimes.indiatimes.com/industry/services/travel/21-5-million-people-in-tourism-sector-lost-their-jobs-since-covid-19-outbreak-govt/articleshow/90201587.cms?from=mdr
44.
UNWTO. (2018). Tourism for development—Volume I: Key areas for action. https://www.e-unwto.org/doi/epdf/10.18111/9789284419722
