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Energy Consumption and Economic Growth Nexus in the Indian Context

Journal of Rural and Industrial Development

Volume 1 Issue 2

Published: 2013
Author(s) Name: Mousumi Bhattacharya, Sharad Nath Bhattacharya | Author(s) Affiliation:
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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

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