Energy Consumption and Economic Growth in India: Empirical Insights and Environmental Implications

Abstract

Economic growth of a nation depends upon several factors like GDP, energy consumption etc. which in turn reflects gas emissions and global warming. Thus, energy security and economic growth is an international problem. This paper represents economic model including GDP, energy inputs and other explanatory variables based on Cobb-Douglas production function. We have empirically analyzed the relation between Indian economic growth and energy consumption. The paper also reflects the relation of India’s CO₂ emission to export trade. Time series data of GDP, energy consumption and CO₂ emission for the period 2001 to 2023 has been taken from financial reports of the RBI and World Bank. Augmented Dickey Fuller test has been used to check the stationary of the variables and both variables found stationary at 1% and 5% significance level respectively. The results of Granger causality test show no Granger causality exists in either direction from economic growth to energy consumption in India. The results of ordinary least squares test show positive relation between GDP and energy consumption in India. One percent increase in energy consumption will raise GDP by 1.85%. Diagnostic tests confirm that residuals are normally distributed, coefficients are stable and there is no ARCH effect.