Examining the Relationship Between Electricity Consumption, Economic Growth, Energy Prices and Technology Development in India

Abstract

This article examines the empirical relationship between electricity consumption, economic growth, energy prices and technology development for India by taking annual time series data from 1981 to 2017. By using the ARDL bounds testing approach to co-integration, the study found long-run equilibrium relationship does exist among the variables. The article reports the existence of positive and significant impact of economic growth on electricity consumption, whereas technological development negatively affects electricity consumption in both the long run and short run. The Granger causality results reveal the presence of unidirectional causality from economic growth and technological development to electricity consumption in India. Therefore, the present study suggests policy makers in India to increase investment in electricity infrastructure to support high economic growth in the country. Further, the policy makers and the government should encourage more technological innovation to minimise usage of fossil fuels and support the use of green energy. This action could help the economy achieve a sustainable economic growth with better environmental quality. JEL Codes: C22, O4, O13, Q43, Q48