Nexus Between Energy Consumption and Economic Growth: Empirical Evidence From India

Abstract

Energy consumption has assumed an indispensible importance in the modern era as it plays a significant role in national production and human development. In particular, the importance of electricity consumption in socio-economic development of a nation cannot be overemphasized. The shortages in the electricity supplies retard the economic growth as most of the economic activities can’t be undertaken altogether due to power outages. In this context, this paper examines the nexus between electricity consumption and economic growth of India for the period 1971 to 2014 by incorporating the energy as measured by electricity consumption in the Mankew-Romer-Weil empirical model of economic growth. The use of Toda-Yamamoto Granger non-causality test lends to support the conservation hypothesis that economic growth is the driver of energy consumption. Thus, the implication is that the energy conservation policy can be adopted without having adverse effects on economic growth of India.