Should India Host The Olympics? An Economic Perspective

On the 78th Independence Day, Indian Prime Minister while addressing the nation in his speech highlighted the nation's ambition to host the 2036 Summer Olympics and confirmed that preparations are already underway. Recently, The Union Sports Minister Anurag Thakur also highlighted the significance of hosting the Olympics and said India will be fully prepared to bring the Games to the country in 2036. But why is the Indian Government so keen on hosting the Olympics, and is in today's day and age is really worth it?

The International Olympic Committee (IOC) and its supporters contend that hosting can raise a city’s global profile and generate economic benefits through tourism and investments in infrastructure. But despite these claims of increased tourism and global profile, research indicates that the economic gains from hosting the Olympics are frequently exaggerated.

In the 1976 Montreal Olympics financial risks associated with hosting increased significantly resulting in almost $1.5 billion in debt for the city. The 2008 Beijing Olympics cost over $42 billion but only generated $3.6 billion, illustrating the financial pitfalls of hosting such events. This highlights a concerning trend in Olympic economics.

In recent times, Olympic host cities have incurred significant financial losses with Rio De Janeiro Games in 2016 is estimated to have cost $13.1 billion and resulted in a loss of around $2 billion. For the 2020 games, Japan reportedly originally budgeted $7.4 billion, which rose to $15.4 billion. The final cost came in at $13 billion against total revenues of $5.8 billion.

The initial success of the 1984 Los Angeles Olympics, which generated a profit, is often cited as an exception rather than the norm. This historical anomaly adds to the complexity of hosting discussions.

It is important to note that the terrorist attack in the Munich Games of 1972 where 11 Israeli athletes and 1 German police officer were killed have raised the security concerns in IOC with expenditures increasing from $250 million in 2000 to $1.5 billion in 2004. In the Paris Olympics 2024, police personnel from over 40 countries were deployed in the city for security of over 10,500 athletes and 15 million tourists. 

While the Games are attended to by millions of tourists and streamed by billions online, there is little evidence to show that the Games sustain tourism. While Barcelona reported an increase in tourism after the 1992 event, and Sydney after 2000, many other cities saw negligible impact of the Games, including Beijing and London. Host countries like Vancouver and London faced similar economic disasters, reinforcing doubts about the benefits of hosting. 

The supporters of the Games also contend that hosting facilitates infrastructure development of the host city and advances its economy by 5 years. But much of the massive sporting infrastructure built sits idle after the event, costing millions of dollars to keep it running. Montreal spent millions to maintain its Olympic stadium while Beijing reportedly spends $11 million a year on its Bird’s Nest Olympic Stadium. Rio de Janeiro converted its $700 million athlete’s village for 2016 Games into luxury apartments and they are now shuttered. There are even instances of host cities dismantling their Games infrastructure after the event.

But the real question is hosting the Olympics actually worth it? - This is a question the Indian government must answer if it truly wants to play host to the 2036 summer games.

There are some benefits of hosting the Olympics as it creates numerous jobs, serving as a catalyst for urbanisation and international recognition. Historical examples show how Olympic events have transformed cities and nations economically and politically.

For example, the 2016 Olympics in Brazil positively impacted 2,200 small businesses, leading to the creation of 18,000 jobs and significant economic growth. This highlights the Olympics' potential benefits. Barcelona's 1992 Olympics resulted in a drastic reduction of unemployment from 18.4% to 9.6%, demonstrating how hosting the Games can lead to long-lasting economic benefits for the host city.

But there is often a gap between projected job creation and actual employment outcomes post-Olympics, leading to disillusionment about economic benefits. Historical examples show minimal long-term employment gains. The unpredictable nature of geopolitics significantly impacts Olympic budgets, with countries facing cost overruns of up to 352% in recent years. This complicates financial forecasting for future events

The Games also serve as a branding and marketing tool for the host country as seen with South Korea's remarkable transformation from 1975 to 1988. This strategic move attracted foreign investments and highlighted national achievements of South Korea in the 1980’s. 

 The 1936 Berlin Olympics served as a powerful propaganda tool for Hitler, showcasing Germany's recovery and promoting a false image of peace and prosperity. It was a pivotal moment in Olympic history. Japan's 1964 Olympics, illustrates how a nation can use global events to reshape their international image post- war conflict. 

THE ROAD AHEAD?

The key to making the Olympics a financial and economic success is detailed planning on where to hold the games, how to integrate the offices and sports facilities built for the event into India’s infrastructure, and how to finance the games without adding much to the government’s spending.

The union government should come up with viable plans to make land available for new towns. Visionary leadership is essential and the committee should be headed by someone with experience in executing large, complex projects. Indian government should learn from the mistakes of the 2010 Commonwealth Games and not confine the leadership pool to the political class otherwise these Games will also be scarred with corruption scandals, mismanagement and ignorant leadership.

In recent years even though the stadiums built in Ahmedabad will be world-class, I however think Delhi appears to have best infrastructure for Olympics as it already has sporting infrastructure built over the decades going back to the Asian Games in 1982 and the Commonwealth Games in 2010. Delhi’s physical infrastructure too is superior to that of other Indian cities, from the metro and roads to airport and hotels. Hosting the Olympics in Delhi may help in cutting operational costs significantly, making the event successful. 

While we do not know for sure if India will be hosting the The Games in 2036, my only hope is that it is well planned and executed and not just extermination of tax payers’ money.

                          Credits: Diya Mishra (TYBA) 

                                              A – 1021

REFERENCES:

https://www.investopedia.com/articles/markets-economy/092416/what-economic-impact-hosting-oly

https://www.cfr.org/backgrounder/economics-hosting-olympic-games

https://www.livemint.com/opinion/online-views/mint-explainer-can-india-afford-the-olympics-11672341396596.html

https://www.espn.in/espn/story/_/id/38669530/india-host-olympic-games-explained-2036-pm-narendra-modi