An empirical analysis of energy consumption and economic growth in India: are they causally related?

Abstract

In this paper an attempt is made to present the energy scenario of India in terms of energy consumption, energy security and energy efficiency. Growth trends and the changes in growth trends of these variables have been estimated for the period 1981 to 2010. In addition, the study makes an attempt to study the causal relationship between energy consumption and GDP both at aggregate and disaggregate levels using cointegration and Vector Error Correction (VECM) methods. The empirical results reveal that India is energy insecure, in spite of an increase in energy efficiency. It seems energy consumption and GDP are bidirectionally related at the aggregate level. In view of these findings some policy suggestions have been provided.