* Research Scholar, Lovely Professional University, Phagwara, E-mail: harwinderkaurrajput@yahoo.in ** Associate Professor, Lovely Professional University, Phagwara, E-mail: vishal.sarin@lpu.co.in I J A B E R, Vol. 14, No. 5, (2016): 247-255 CAUSALITY RELATIONSHIP BETWEEN GDP, FDI, TOURISM: EMPIRICAL EVIDENCE FROM INDIA Harwinder Kaur * and Vishal Sarin ** Abstract: Tourism is emerging as one of the most important sectors in the world economy. It is playing an important role as an efficient tool to promote economic growth of the host country. Since last few decades, the rapidly growing tourism in Indian economy is providing vast potential for generating employment and earning large amount of foreign exchange impacting country’s overall economic and socio-cultural development. It is very important to examine the relationship between expanding tourism sector and economic growth in India. This paper attempt to investigate the causality between economic growth and Tourism selecting some indicators such as real gross domestic product, tourism foreign exchange earnings, foreign tourists arrival and FDI. The study using popular time series models for the period spanning from 199I to 2014, provides the evidence of long-run unidirectional causality from tourism activities to economic growth of the country. Therefore, government can considered this relationship as an important tool for policy implication to achieve sustainable growth in tourism and of the economy as well. Keywords: Tourism, FDI, India, Economic Growth, Co integration, Granger Causality JEL Classification Code: Z32, C21, C82, O11, L83, O24 I. INTRODUCTION Tourism is one of important sector in the world economy. The relation between tourism and economic development has been the focus of study and research in the resent years. Tourism has been emerging as the biggest industry to impact the overall growth of the economy (Lashkarizadeh, Gashti, & Shahrivar, 2010). Growing tourism in any economy not only leads to economic progress but also leads to progress of political, cultural and social environment of the host country. In various approaches, international tourism is clearly seen to influence on the long-term economic growth (Brida and Aguirre 2009). In the recent years tourism and FDI has emerged as important sector to achieve sustainable development for many developed and developing countries. Furthermore, it is argued that FDI and growth may not impact each other directly but indirectly FDI does impact infrastructure and human development. There is need to study this impact of FDI on growth (Karimi & Yusop, 2009). There is plenty of empirical and theoretical research analyzing the role of tourism and FDI in economic development.