Convergence in electricity consumption across Indian states: a disaggregated analysis

Abstract

Purpose The purpose of this study is to examine whether the electricity consumption patterns across Indian states do converge. Design/methodology/approach This study considers 18 Indian states spanning over the period 1970-1971 and 2014-2015, using the recently developed Phillips and Sul panel convergence technique that accounts the multiple steady states. Findings The results provide the following insights. First, the authors find evidence of convergence in electricity consumption among all Indian states. This suggests that electricity consumption patterns for Indian states are converging to a common steady state. Second, to provide broader insights, we further investigate the convergence in electricity consumption among user groups such as agriculture, industry, commercial, domestic and miscellaneous. The results reveal that commercial, domestic and miscellaneous groups are also converging. Third, the non-convergence patterns in agriculture and industry enable us to investigate the possibility of clubs or the multiple common steady states. The results indicate the occurrence of three clubs in case of agriculture and two clubs in case of the industry. Fourth, this study also inspects the relative speed of convergence among the user groups. The results reveal the higher speed of convergence in case of the domestic user group. Practical implications The findings enable policymakers to formulate an appropriate energy policy to accommodate the future electricity demand across Indian states and prioritize low electricity consumption states so that they receive a greater share. Originality/value This is the first study that examines the convergence in electricity consumption across Indian states at aggregate and user groups using a new panel club convergence technique.