Relationship between agricultural growth and energy consumption in Indian agriculture: A panel co-integration analysis

Abstract

Abstract This paper empirically examined the long-run co-movement and the causal relationship between electricity consumption and real Gross State Domestic Product (GSDP) from agriculture and allied sector for 17 major states of India during the period 1993-2013. Since the time series analysis may yield unreliable and inconsistent results with the short time spans of datasets, we employed new heterogeneous panel co-integration and panel-based error correction models techniques to investigate the relationship between two variables. The empirical results fully supported a positive long-run co-integrated relationship between GSDP and electricity consumption when the heterogeneous states effect is taken into account. It is found that although agricultural growth and electricity consumption lack short-run causality, there is a long-run unidirectional causality running from electricity consumption to agricultural growth. This implies that reducing electricity consumption does not adversely affect agricultural growth in the short-run but would affect in the long-run. Keywords: Agricultural growth, Electricity consumption, Panel co-integration Acknowledgement : I wish to thank ICAR- Indian Agricultural Statistics Research Institute to provide facilities for the work.