The effect of climate policy uncertainty and geopolitical risks on foreign tourism activities in India

Purpose While existing literature emphasises economic factors to examine tourism demand, growing uncertainties in recent years have shaped international tourism. Hence, this study examines how climate policy uncertainty (CPU) and geopolitical risks (GPR) affect India's inbound tourism demand. Design/methodology/approach We use foreign exchange earnings from tourism (FEET) and foreign tourist arrivals (FTA) to study India's tourism demand from abroad over the period 2003M1 to 2019M12. We employ a nonlinear autoregressive distributed lag model to identify asymmetric short- and long-run effects and a time-varying Granger causality analysis to capture evolving causal dynamics. Findings The empirical results reveal significant nonlinear and state-dependent dynamics. CPU exerts a persistent negative effect on tourism demand, suggesting regulatory risk surrounding climate-related policies and weakening destination attractiveness. However, GPR exhibits short-lived, episodic effects, altering perceived safety during global and regional crises. The findings suggest that India's tourism sector is more sensitive to CPU than to GPR in the long run, because CPU alters the anticipated cost of future travel and tourism investment. Our results can be understood through the combined lenses of real options, expectations and risk perception theory. Research limitations/implications The findings indicate that stable and predictable climate policy frameworks matter as much for tourism performance as conventional economic determinants. Because arrivals and earnings respond differently, destination performance should not be judged on visitor numbers alone. Policy effort is best directed at reducing regulatory ambiguity over the long run and at shortening recovery from geopolitical episodes in the short run. Originality/value The results underscore the importance of stable climate frameworks and resilience-oriented policies in safeguarding sustainable tourism growth. By incorporating CPU and GPR into a tourism-macroeconomy framework and time-varying causality, we reveal a shifting uncertainty-tourism relation. This study extends the literature on uncertainty and services trade.