Separating the Impact of Power Sector in the Energy-Growth Nexus : An ARDL-ECM Approach

This study differentiates between the impacts of primary energy consumed and energy consumed in the power sector, on overall economic growth, to efficiently target the energy conservation policies. We employed Autoregressive Distributed Lag modeling to test the presence of a long run relationship between energy variables and economic growth in India for the period 1990-2021. Long run bidirectional causality is detected between economic growth and non-renewable energy consumption and unidirectional causality running from economic growth to renewable and non-renewable electricity consumption, that is, the power sector. In terms of resource consumption, this means reduction of fossil fuel consumption in the power sector will not significantly impact the economy while its reduction in other sectors such as manufacturing and transport will negatively affect the economy. A strong feedback effect is observed between growth and energy consumption making energy conservation policies unfavourable to the Indian economy