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The Economic Effects of Electricity Deregulation: An Empricial Analysis of Indian States

  • Sen, A.
  • Jamasb, T.

As developing countries seek to improve their economic prospects, electricity reform has been widely viewed as a central part of this effort.While the focus of most research to date has been at economy or utility level; there has been much less research on regional outcomes. India presents a unique case, as its states share a common economic and political system, whilst having been given considerable flexibility in how they implement reform, thus allowing a comparative analysis of alternative approaches. This study contributes through an econometric analysis of the determinants and impact of electricity reform in India, giving special regard to its political economy and regional diversity. It assesses how electricity reform in India has affected key economic variables that determine sectoral efficiency, prices and investment flows. We use panel data for 19 states, spanning 1991-2007, using dynamic panel data estimators. Results show that individual reform measures have affected key economic variables differently; thus the nature of reform in individual states would determine these economic outcomes. Findings suggest that due to political economy factors influencing reform, outcomes have tended to be adverse in the initial stages, as previously hidden distortions become apparent. The performance of reforms, however, may improve as it progresses beyond a ‘baseline’ level.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1005.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1005.

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Date of creation: 22 Jan 2010
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Handle: RePEc:cam:camdae:1005
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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