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Energy Consumption and Economic Growth Nexus in the Indian Context


Affiliations
1 Army Institute of Management, Kolkata, India
2 Rajiv Gandhi Indian Institute of Management, Shillong, India
     

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An attempt is made to determine the direction of causality between disaggregated energy consumption (coal consumption, petroleum consumption and electricity consumption) and overall economic growth in India's economy. Methodology adopted includes Johansen co-integration test, Granger causality test in a VECM framework followed by impulse response analysis. The findings show a long term relationship among the variables. Additionally, bidirectional causality between coal consumption and economic growth is observed and a unidirectional causality is observed from petroleum consumption to economic growth. The findings suggest that proper and efficient sectoral allocation policy on energy should be designed coupled with adoption of environmental policies aiming at increasing energy efficiency and the use of renewable energy.

Keywords

Energy Consumption, Economic Growth, Co–integration, Granger Causality, Impulse Response Analysis
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  • Energy Consumption and Economic Growth Nexus in the Indian Context

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Authors

Mousumi Bhattacharya
Army Institute of Management, Kolkata, India
Sharad Nath Bhattacharya
Rajiv Gandhi Indian Institute of Management, Shillong, India

Abstract


An attempt is made to determine the direction of causality between disaggregated energy consumption (coal consumption, petroleum consumption and electricity consumption) and overall economic growth in India's economy. Methodology adopted includes Johansen co-integration test, Granger causality test in a VECM framework followed by impulse response analysis. The findings show a long term relationship among the variables. Additionally, bidirectional causality between coal consumption and economic growth is observed and a unidirectional causality is observed from petroleum consumption to economic growth. The findings suggest that proper and efficient sectoral allocation policy on energy should be designed coupled with adoption of environmental policies aiming at increasing energy efficiency and the use of renewable energy.

Keywords


Energy Consumption, Economic Growth, Co–integration, Granger Causality, Impulse Response Analysis

References