Investigating the asymmetric impact of energy on India's development: insights from the NARDL model

PurposeEnergy is a pivotal factor for achieving Sustainable Development Goals for India. This study examines the critical supply-side factors of Energy Generation (EG) in India, with a particular focus on the role of Fiscal Deficit (FD), Transmission Deficit (TD) and per capita GDP (PGDP).Design/methodology/approachThe study utilises yearly data from 1970 to 2023 and applies the non-linear autoregressive distributed lag (NARDL) model with a structural lag to capture potential asymmetries. A Toda-Yamamoto Granger causality has been applied to observe the causal effect among the regressors and regressand.FindingsIt shows asymmetric effects, wherein economic downturns disproportionately lower energy production, underscoring the energy supply's susceptibility to downturns. While FD, TD and PGDP significantly reduce energy generation by 0.419%, 1.075% and 0.084%, respectively, a policy shift tends to bring in more fiscal discipline across the centre and state governments. The Toda and Yamamoto Causality found a positive unidirectional relationship from PGDP to EG. The study also discovers a unidirectional relationship from EG to FD, suggesting a mounting fiscal burden on the government due to persisting structural problems in the energy sector.Social implicationsReliable and sustained electricity supply has far-reaching impacts on poverty alleviation and improved quality of life. Policies aimed at stabilising energy generation and income growth can therefore directly contribute to exclusive and equitable socio-economic development.Originality/valueThis is the first study to apply the NARDL framework with a structural break to India's electricity sector from the generation side. It captures asymmetric causal associations and provides novel insights into the interplay of demand-delivery constraints and macroeconomic indicators in determining the energy security of the country. This study offers evidence-based implications for energy reforms in emerging economies.