Patterns of Energy Consumption in Manufacturing: Looking at the Eastern States of India

Abstract

Energy is a vital input in achieving rapid economic growth in India and therefore in each of its states. Key policies such as ‘Make in India’ and ‘Smart Cities Mission’ are expected to only contribute to a rapid increase in energy consumption in most Indian States. Yet, India is also committed to reducing its greenhouse gas emissions. Hence, it needs to adopt policies that would achieve growth and, at the same time, reduce carbon emissions. Manufacturing is a significant component of the engine that spurs economic growth, and it is a major consumer of energy. This study aims to identify the core factors that have influenced energy consumption by the manufacturing industries of five eastern states (Bihar, Chhattisgarh, Jharkhand, Odisha, and West Bengal) of India in the period 2010–11 to 2014–15 and also intends to make an interstate comparison of energy consumption. We conduct an index decomposition analysis, more specifically the log mean Divisia index, to identify key factors behind the increase in energy consumption. The findings of the study suggest that besides energy intensity, ‘level of activity’ is a major contributing factor. The findings also indicate that there remains a lot of scope for improving energy-related policies with regard to the manufacturing industries of eastern India.