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Friday, 11 September, 2015, 12 : 00 PM [IST]

Changing Fortunes

P. Krishna KumarIt’s crisis time in the global economy! If the last crisis had its origin in the US, the latest one has its epicentre in Asia, and that too in our backyard - China. Although the magnitude of the Chinese economic crisis is not yet clear, alarm bells have started ringing in major economies of the world, which were dependent on mineral exports to China. There are fears of a much bigger global crisis this time around, because of China’s large and pervasive hold over the global economy.

The Chinese crisis can also spell doom for tourism prospects of many countries in the world. The effects will be multifold. One, of course, would be the seemingly direct impact of the curtailment of travel by Chinese nationals. China is one of the top source markets for global tourism. As per official statistics for 2014, the number of outbound tourists stood at 107 million, registering a growth of nearly 20 per cent over the preceding year. A large chunk of this, almost 85 per cent, travelled within Asia, aiding the survival of many economies in the continent. If the readjustment by the Chinese administration to bring the economy back on track does not see the desired results in the near future, many countries and MNCs will be forced to realign their strategies. This would be difficult and time-consuming, which in turn will lead to major cuts in corporate travel spending for a while, resulting in a body blow to the tourism and hospitality industry the world over.

India, for the time being, is untouched by the crisis in China. However, our stock markets and currency went into a tailspin in the aftermath of the crisis. The rupee slid to a four-year low against the US dollar, in spite of brave talks by our political and financial masters. Those who reassure and repose faith in our foreign exchange reserves and strong macro-economic fundamentals, do not explain the extreme volatility of our currency even at the minutest changes in global economy. If the slide continues, there will definitely be repercussions on the travel and tourism market, especially outbound from India. Companies have already reported a slowdown in terms of enquiries for outbound packages for the season ahead.

Another major crisis that adds to the volatility in the travel market is the growing political unrest in the Middle East and Far East. The unrest unleashed by the Arab Spring is yet to die down, as ultra-fundamentalist elements call the shots in many regions and spread their tentacles to new territories.

The continuing slide in oil prices is also threatening to snowball into a major destabilising factor for economies that depend on oil revenues. The changing fortunes make short- or long-term predictions impossible for any industry in the world. This unpredictability is more evident in the case of travel and tourism, which requires peace, prosperity, and stability to grow and prosper.

P Krishna Kumar
Bureau Chief, New Delhi

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