Electricity Consumption and Economic Growth in South Asia

Abstract

This study investigates the effect of electricity consumption on economic growth of four South Asian countries, namely, Pakistan, India, Bangladesh and Sri Lanka, by employing time series annual data from 1980 to 2010. Pedroni’s panel cointegration results confirm that there exists valid long-run relationship between electricity consumption and economic growth in South Asia. Results of random effects model suggest the positive and significant impact of electricity consumption on economic growth of South Asian countries. Robustness of the initial findings of positive and significant relationship is confirmed by four different sensitivity analyses. Results of panel Granger causality test confirm the unidirectional causal relationship runs from electricity consumption to economic growth. It is therefore recommended that the South Asian countries should consider the development initiative and low-cost mode to produce electricity to enhance economic growth in the region.