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Examining the linkage between energy consumption and economic growth in India

Author

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  • Hrushikesh Mallick

    () (Centre for Development Studies (CDS), India)

Abstract

The paper examines whether energy use drives economic growth or vice versa in the Indian context during 1970–71 to 2004–05. Utilizing Granger causality test, the study suggests that it is the economic growth that fuels more demand for both crude oil and electricity consumption and it is the only growth of coal consumption that drives economic growth. When influence of different components of energy on major two components of economic growth is investigated with the same causality test, none of the energy components found to be significantly influencing the two components of economic growth viz. private consumption and investment. In contrast, the variance decomposition analysis of Vector Autoregression (VAR) suggests that there could be a bidirectional influence between electricity consumption and economic growth, other results remaining unchanged. Therefore, the study yields mixed and contradictory result compared to the previous studies in the Indian context. However, on the basis of application of two econometric tools, the study with little more conviction suggests for reducing crude oil and natural gas consumption at least in the consumption sectors, which don’t directly contribute to production or add to capital formation of the economy, for achieving higher rate of growth in the economy.

Suggested Citation

  • Hrushikesh Mallick, 2009. "Examining the linkage between energy consumption and economic growth in India," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(1), pages 249-280, September.
  • Handle: RePEc:jda:journl:vol.43:year:2009:issue1:pp:249-280
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    Citations

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    Cited by:

    1. Keshab Raj Bhattarai, 2016. "Economic Growth and Development in India and SAARC Countries," EcoMod2016 9631, EcoMod.
    2. repec:eee:eneeco:v:63:y:2017:i:c:p:199-212 is not listed on IDEAS
    3. Ismail SOILE & Kareem A., 2016. "Bolivia’S Energy Consumption And Economic Growth Profile: Is There A Link?," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 1, pages 95-102.
    4. Shahbaz, Muhammad & Mallick, Hrushikesh & Mahalik, Mantu Kumar & Sadorsky, Perry, 2016. "The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development," Energy Economics, Elsevier, vol. 55(C), pages 52-68.
    5. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.
    6. Janda, Karel & Torkhani, Marouan, 2016. "Energy, carbon, and economic growth: Brief literature review," MPRA Paper 75439, University Library of Munich, Germany.
    7. Alam, Mohammad Jahangir & Ahmed, Mumtaz & Begum, Ismat Ara, 2017. "Nexus between non-renewable energy demand and economic growth in Bangladesh: Application of Maximum Entropy Bootstrap approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 399-406.
    8. Khraief, Naceur & Shahbaz, Muhammad & Mallick, Hrushikesh & Loganathan, Nanthakumar, 2016. "Estimation of Electricity Demand Function for Algeria: Revisit of Time Series Analysis," MPRA Paper 74870, University Library of Munich, Germany, revised 01 Nov 2016.
    9. repec:eaa:aeinde:v:19:y:2019:i:2_8 is not listed on IDEAS
    10. Noh, Nadia Mohd & Masih, Mansur, 2017. "The relationship between energy consumption and economic growth: evidence from Thailand based on NARDL and causality approaches," MPRA Paper 86384, University Library of Munich, Germany.
    11. repec:gam:jeners:v:11:y:2018:i:6:p:1536-:d:152205 is not listed on IDEAS

    More about this item

    Keywords

    Energy Consumption; Economic Growth; Granger Causality; VAR & India;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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