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Oil Price and Economic Growth: The Case of Indian Economy

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  • Tarek Tawfik Yousef Alkhateeb

    (Department of Marketing, College of Business Administration, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia,)

  • Zafar Ahmad Sultan

    (Department of Economics, L.S. College, B.R.A. Bihar University, Muzaffarpur, Bihar, India.)

Abstract

Oil is an important input used in almost all the economic activities of any country. Hence, rise in its price is likely to adversely affect economic growth of oil importing countries like India. The present paper intends to examine the impact of oil price on economic growth of India. In order to examine the presence of cointegration relationship between economic growth, oil price, capital formation and inflation in the case of India, the study has used Pesaran s bound test method. The study finds that the variables under study exhibits long run cointegration relationship. VECM results suggest that oil price, capital formation and inflation Granger cause economic growth in the long run. Further, the result shows that the coefficient of oil price is negative and significant implying that oil price in India adversely affects country s economic growth. The study suggests that the government should refrain from imposing additional taxes in order to avoid rise in oil prices and its subsequent adverse effect on economic growth of the country.

Suggested Citation

  • Tarek Tawfik Yousef Alkhateeb & Zafar Ahmad Sultan, 2019. "Oil Price and Economic Growth: The Case of Indian Economy," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 274-279.
    • Handle: RePEc:eco:journ2:2019-03-31
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    References listed on IDEAS

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    Cited by:

    1. Valeriy Prasolov & Valery Bezpalov & Svetlana Doguchaeva & Rodion Rogulin, 2020. "Energy Price Formation and Energy Consumption by Households as a Factor of Ensuring Energy Safety," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 82-93.
    2. Tomader Elhassan, 2021. "Impact of Oil Price Fluctuations on Economic Growth in Saudi Arabia: Evidence from a Nonlinear ARDL Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 579-585.
    3. Umar Tijjani Babuga & Niaz Ahmad Mohd Naseem, 2022. "Oil Price Change and Economic Growth: Evidence from Net Sub-Saharan Africa Oil Exporting Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 12(2), pages 369-378, March.
    4. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "Oil Price and Capital Formation Nexus in GCC Countries: Asymmetry Analyses," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 146-151.

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    More about this item

    Keywords

    Oil Price; Economic Growth; Bound Test; India.;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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