Trends in GDP Growth and Energy Usage in India

Economic growth has long been found to pull up energy demand and consequently, energy consumption. In India too, the tendency of GDP and energy consumption to move in close conjunction is corroborated by empirical data. However, an increasingly dominant trend in recent years has been the apparent “decoupling” of energy demand from economic growth, observed principally in the developed world, with developing countries fast catching up. It is no longer axiomatic that GDP growth would automatically and inevitably translate into a proportionate increase in energy use. The factors contributing to this new phenomenon range from the increasing weightage of the services sector relative to manufacturing, to greater efficiency in energy use. Given the emphatic structural shift that the Indian economy has been undergoing over the last quarter of a century, it is worthwhile to investigate the presence of such decoupling effects between GDP growth and energy usage in India. This chapter studies the broad patterns of industrialization and sectoral change in India since the post-Independence period, corroborating such development with changes in energy usage and energy intensities. The empirical evidence suggests that from 2012–13 onwards, there has been a possible decoupling between GDP growth and energy consumption in India. However, we offer this as a tentative possibility as the data set admittedly needs extending to a longer span for a firm conclusion. It should also be mentioned that the time period envisaged in this analysis just stops short of the ravages of COVID-19.