Revisiting Nexus Between Economic Growth and Electricity in India

Abstract

Energy is the backbone of economy, wherein electricity gains momentum as it turns a basic amenity. There are few studies in India that discuss the nexus between economic growth and electricity consumption. However, the earlier studies failed to consider the generation of electricity. Thus, this study attempts to unveil the relationship among GDP, electricity generation and electricity consumption in India. This study employs the annual time series data collected from the World Development Indicators database of the World Bank for the period of 1971 to 2011. The result of this study is inconsistent with the earlier literature expressing no long run nexus among GDP, electricity generation and electricity consumption as it is insignificant to explain one another. However, there exists short run relationship running from GDP to electricity generation and electricity consumption. Consequently, the government can initiate electricity conservation policies to scale up the economic growth.