Impact of sectoral decompositions of electricity consumption on economic growth in India: evidence from SVAR framework

Abstract

The study examines the effects of electricity consumption from different sectors such as agricultural, commercial, domestic, industrial (HV), industrial (LV-MV) and miscellaneous sectors on economic growth over the period of 1981–2019 in the case of India. We used SVAR framework and concluded that the consumption of electricity from agriculture sector has a negative impact on economic growth, whereas the industrial (HV and MV-LV) and commercial electricity consumption has positive impact on economic growth. Similarly, electricity consumption by the domestic sector has less positive effect on economic growth. Further, we computed the total factor productivity growth (TFP) by using the DEA method and showed the effects of sector-wise electricity consumption on TFP as the robustness of our analysis. We obtain similar kind of results. From the policy perceptive, the study suggests that the government must speed up the construction of a power grid to improve the availability of electricity for achieving higher rate of economic growth.