An Exploration of the Impact of Electricity Consumption on Economic Growth in India using ARDL Cointegration Analysis

Abstract

This study examines the connection between electricity consumption and economic growth of India from 1980 to 2017. Initially, the study conducted stationary test to study the stationarity properties of the variables. Autoregressive distributive lag (ARDL) model was used to estimate the long-run relationship among the variables. In addition to this, to estimate the causality between the variables, the study has employed Toda–Yamamoto Granger causality test. The long-run estimation of the ARDL model suggests that electricity consumption does not impact output per capita, while financial development and physical capital have positive and significant impact on output per capita. In line with the ARDL model, the Toda–Yamamoto Granger causality test also does not show any causal relationship among the variables. Based on the empirical outcomes, the study suggests few policy prescriptions.