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Energy consumption, economic growth and financial development: exploring the empirical linkages for India

Author

Listed:
  • Mantu Kumar Mahalik

    (Amrita University, India)

  • Hrushikesh Mallick

    (Centre for Development Studies, India)

Abstract

This study investigates the relationship between energy consumption, economic growth and financial development in India by using the annual data for the period 1971-2009. An application of Auto Regressive Distributed Lag (ARDL) approach to cointegration results suggest that energy consumption is positively and significantly impacted by proportion of urban population in total population, while the same is negatively and significantly impacted by financial development, economic growth and proportion of industrial output in total output. The cointegration results also further suggest that an increase in proportion of urban population adversely influences economic growth, whereas energy use positively influences economic growth. The findings have significant policy implications for the Indian economy as we find energy use positively impacts on economic growth, suggesting that India is harnessing on the effective use of energy. However, it is recommended that India needs to be cautious in the effective use of energy in proper channels.

Suggested Citation

  • Mantu Kumar Mahalik & Hrushikesh Mallick, 2014. "Energy consumption, economic growth and financial development: exploring the empirical linkages for India," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(4), pages 139-159, October-D.
    • Handle: RePEc:jda:journl:vol.48:year:2014:issue4:pp:139-159
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    More about this item

    Keywords

    Energy use; financial development; Growth; ARDL model;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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