Can India Host Olympics Without Meeting The Economic Fate of Greece and South Korea?

Prime Minister Narendra Modi confirmed last month that India will bid for the 2036 Olympics, making it the first time that the country will attempt to host the world’s biggest sporting event. The announcement was met with excitement from those in the government, from the private sector and sports enthusiasts in the country, with many indicating that hosting the Summer Games in 2036 will truly announce India’s arrival in the global sporting stage. After all, the world’s most populous country has not managed to leave an impressive mark in international sports until now, barring some exceptions like cricket and hockey.

In the recently concluded Asian Games and Asian Para Games, India created new records, bringing home more medals than ever before. This would suggest that the country is finally on the right track when it comes to realising its previously untapped sporting potential. But will the hosting of a multi-billion extravaganza like the Olympics really help the country in the long run? From an economic standpoint, host countries often stand to lose more than it can gain because the Olympics does not come cheap, and it is more alarming for a lower-middle-income economy like India.

Economic Dangers Of The Olympics 

A research study by Citigroup shows that countries often have to tackle a slowdown in economic growth after hosting the Olympics. One of the most common reasons for this is that the infrastructure costs borne by host countries to prepare for the games generally fail to generate sufficient economic demand in the subsequent years. In one extreme case, the GDP of South Korea, which hosted the 1988 Olympics, saw close to 15 per cent growth in two quarters before the Olympics. In the two quarters post the event, it slumped to 5 per cent, a stark decline of 10 per cent. Moreover, the GDP growth of South Korea slowed down to 7.07 per cent in 1989 from the high of 12.72 per cent recorded in 1987.

Another country which suffered the brunt of hosting Olympics was Greece. In the Citigroup study, researchers pointed out that the two quarters before the Olympics saw growth close to 4 per cent, which fell to nearly 2 per cent in the two quarters post-Olympics.  Its GDP growth fell from 5.79 per cent in 2003 to 0.60 per cent in 2005. The 2004 Athens Olympics also acted as a catalyst for the economic crises that Greece underwent from 2007 onwards.

Brazil is a recent victim of the high costs associated with Olympics, having hosted the Summer Games in 2016. To this day, a large part of the infrastructure built in Rio de Janeiro to host the games remains unused, as a monument of wasted taxpayer money. This is not surprising, or a one-off incident, given that host countries often underestimate the costs associated with the games and as a result, suffer from economic distress in the aftermath of the games. Bent Flyvbjerg, professor emeritus at University of Oxford, found in his study that Olympic Games have an average cost overrun of 172 per cent. For Summer Games alone, which India aspires to host in 2036, it stands at a whopping 213 per cent.

 “If a host country is not extraordinarily careful, and doesn’t plan very effectively, then they end up spending billions of dollars on facilities and infrastructure that they don’t need. Or even if they do need it, it’s in a very low order of priority. So they are diverting resources from urgent and important uses to uses that are very dubious and questionable,” cautions Andrew Zimbalist, a US-based sports economist.

He points out that it is especially difficult for countries with low GDP per capita, like India. “When a country has a lower GDP or GDP per capita, it means that they have less infrastructure available in terms of sports, transportation, hospitality and security. And if there’s less infrastructure available, it means more has to be built.” Even for more developed economies, the Olympics can often be a triggering point for acute financial and economic distress. In the case of Montreal in Canada, the host city of the Summer Olympics in 1976, it took 30 years for the city to clear the debt it incurred to host the games.

If the economic perils of hosting Olympics can be so bad, why do countries like India even want to bid for the games? The reason is not economic alone.

The Bigger Picture

Divyanshu Singh, chief operating officer of JSW Sports, says, “One of the benefits [of hosting the games] is definitely the role it plays towards nation building. Sports play a huge role in terms of changing your perception globally. For example, what the Barcelona Olympics did for Spain when it was just coming out of the shadows.”

After the fall of Franco dictatorship in Spain, it was only in 1977 that the elections to a democratic Spain was held. So, the 1992 Olympics became a platform for Spain to exhibit its newly created democratic form to the world, and in some ways, have a fresh start. Zimbalist also agrees that 1992 Barcelona Olympics was one of the rare economic successes given the planning that went into the games. “One hallmark of differentiation was that Barcelona already had a plan for the city because they were redoing the city after Franco died. And they democratically generated a new plan for what they wanted the city to look like. And they fit the hosting of the games into that plan,” he says.

From the government’s perspective, hosting a successful Olympics will also purge the bad reputation it gathered during the 2010 Commonwealth Games (CWG), which was rocked by corruption scandals worth hundreds of crores. The Olympics has also witnessed corrupt practices many times on account of the large infrastructure projects it includes. Zimbalist says, “The fact of the matter is that the Olympic organising committees and the politicians have an enormous amount of power because they give out billions of dollars of construction contracts. The construction companies have a strong incentive to bribe. Almost always, the politicians can’t avoid trying to take advantage of their position of power and handing out contracts based on favouritism.”

For India, it becomes crucial to maintain transparency in all processes even now, as it is still trying to secure the rights for 2036 Summer Games. All unwarranted expenditure will be seen as wastage of public money, which is unbefitting of a democracy and an aspiring superpower.

By hosting Olympics, India hopes to showcase its rising economic might. In this sense, what India is aspiring to achieve is what China did in 2008 when it hosted the Beijing Games.

In 2008, China’s GDP per capita was $3446. Although this was less than the average GDP per capita in emerging markets and developing economies at that time, it came on the back of a period of high growth for the communist country. In the run-up to the 2008 Beijing Games, Andy Rothman, an economist with US-based brokerage firm CLSA had said that China was well equipped to spend billions on the sporting event because it was close to a national budget surplus at that point. “The majority of the money accounts for permanent infrastructure, stuff that we think, long term, will actually be productive for the Chinese economy,” he’d said.

Eventually, China did spend over $50 billion on the 2008 edition of Olympics, making it the most expensive Summer Games in history. But since then, China’s annual economic output more than tripled, and it can be seen that China continued its exponential economic rise until it was eventually stalled by the Covid-19 pandemic.

 “For China, hosting the 2008 Summer Games was a show of strength. It was a way of showing the world that a superpower was on its way. Further, by hosting 2022 Winter Olympics under the shadow of the pandemic, China demonstrated how well it can overcome challenges,” says Shakya Mitra, a New Delhi-based sports management consultant.

Another highlight of the 2008 Games was that cost overruns were very low, at just two per cent. Although China does not have good credibility around the accuracy of its reported economic figures, Flyvbjerg noted in his study that there’s no reason to doubt the low cost overruns in 2008. Meticulous planning in terms of cost estimates and post-event utilisation of new infrastructure truly set apart the Beijing Games and that’s something that India would like to emulate as well, given that India’s current economic standing is not too far from where China stood in 2008. India, too, will cross $3446 GDP per capita sometime between the 2024 Paris Olympics and 2028 Los Angeles Olympics, according to International Monetary Fund (IMF) estimations.

Along with emulating on China-like economic growth, the country also has to work toward the goal of achieving a high medal tally. As a host nation, the performance at the event becomes a matter of prestige.

Stepping Up For Sports

The key to increasing the medal tally at Olympics is private investment in the sports ecosystem of the country. Private funds can be utilised for overall sports development in the country and some corporate houses have already included sports development programmes as part of their CSR activities. So far, less than one per cent of total CSR spends is going towards sports related activities, but some tweaks in government policies could change this.

“Due to lack of transparency in the sports ecosystem it is difficult to set a return-on-investment target. This is why corporates shy away from investing in sports. It is imperative in this regard that sports is declared an industry by the government,” suggests Rajpal Singh, director-general at Confederation of Sports and Recreation Industry. “By granting industry status to sports, the sector will avail many financial benefits like access to banking facilities, loans at lower interest rates, attracting equity investment, participation of venture capitalists and a simplified approval process,” he adds.

‘Industry’ status for sports will also incentivise private companies to start for-profit sports development ventures that can eventually improve the state of sports in India. So far, the investments only come in for strategic purposes. “Corporates find it very easy to get return of investment when it comes to cricket but to invest in grassroots sports, corporates like JSW are investing because it is part of our strategy towards nation-building,” says Divyanshu Singh of JSW Sports.

With the 2036 Games in sight, India can strategise to identify sports where its teams stand a chance and work towards winning gold medals in select events, suggests Mitra. “In the 2024 Olympics, it’s not unrealistic for India to aim for Top-20 finish. Based on previous editions, we’ll have to win at least 10 medals including at least four gold medals to finish in Top-20. From there on, if we improve our tally incrementally, we can maybe reach Top 8 by 2036 which will be a respectable position for a host nation,” he says.

At this point, as the International Olympic Committee is yet to finalise a host country for 2036, India’s chances of hosting the Summer Games are not clear. However, keeping in mind the many lessons that past editions have to offer, it stands to reason that the country has to plan meticulously in financial as well as sporting aspects. If India’s economic trajectory follows a path similar to what China underwent in the past couple of decades, hosting the Olympics will be about more than just sports. It will be a partnership between the country’s economic ambitions and sporting aspirations. It will also be an opportunity to showcase its superpower dreams that can eclipse the success of 1992 Barcelona and 2008 Beijing, in a way that will be unique to India.