REaD (Resources, Energy, and Development)
Year 2006, Volume-3, Issue-1 (March)
Print ISSN : 0973-0516
Coal and gas consumption with economic growth: co-integration and causality evidences from India
Authors: Sajal Ghosh, Sujay Basu
Economic growth of a nation is closely related to its availability of energy. However, development of the Indian energy sector has been constrained by capital, technology, environment, and security issues arising from internal and external circumstances.The causal relationship between energy consumption and economic growth has been the prime focus of economists and policy analysts since the 1970s. Several studies on energy economics have examined this relationship. The central issue has been whether economic growth stimulates consumption of energy or is energy consumption itself a stimulus for economic growth via the indirect channels of effective aggregate demand, improved overall efficiency, and technological progress. Addressing this issue is crucial from the policy formulation point of view. For example, existence of unidirectional causality, running from income to energy consumption, would imply that energy conservation policies could be initiated without having adverse economic side effects. On the other hand, if unidirectional causality ran from energy consumption to income, reducing the energy consumption could lead to a fall in income.
