Energy Intensity, Productivity and Pollution Loads: Empirical Evidence from Manufacturing Sector of India

Abstract

We explain the relationship between energy intensity and productivity for the organized manufacturing sector of India. Using data from the secondary sources, we explain the relationships at aggregate, state and industry levels. The novelty of this paper lies in bringing in pollution loads in explaining inter-industry variations in energy intensity. Results of this study indicate that the organized manufacturing sector of India has gained energy efficiency and productivity. We found heterogeneity among Indian states in productivity growth and energy intensity. The results indicate that small states performed well whereas large states fall in the productivity paradox. The productivity dilemma hypothesis is validated at industry level analysis however, results are inconsistent to validate the decoupling growth hypothesis. Pollution loads as classified by Government of India, plays a vital role in explaining energy intensity variations across industries, which calls for better policies aiming at pollutive industries specifically to achieve sustainable growth for the manufacturing sector of the Indian economy.