Energy Consumption and Economic Growth in India

Abstract

The study examined the dynamics and quantitative relationship between carbon emission, energy consumption, and economic growth in India using annual data from 1990 to 2019. First, to determine the extent and magnitude of the relationship between variables, this study used unit root tests (ADF & KPSS) where all variables were integrated of order one. Cointegration was confirmed through Johansen &Julesius test for Co-integration and Bounds test, and then Vector Error-Correction modelling was done. The finding of causality demonstrated that carbon emissions were related to economic growth in both the short and long run. Since the growth hypothesis, that is, Environmental Kuznet Curve (EKC), was correct, it can be suggested that India can certainly reduce pollution by accelerating its growth trajectory. This growth pattern should include energy-efficient techniques; hence, more investments in research and innovations are required to take benefit of the inverted U relation of growth with pollution. Keywords: Carbon emissions, cointegration, energy consumption, GDP, Granger causality, VECM. JEL Codes: C32, K32, 044