The nexus of ICT, electricity consumption and economic growth in India: an ARDL approach

Abstract

This study examines both the short-run and long-run relationship among information and communication technology (ICT), economic growth and electricity consumption using annual time-series data for India for the period 1991-2014. All the variables under study are I (1) as per Dickey-Fuller-Generalised least square unit root test results. For cointegration test and causality analysis, we have used autoregressive distributive lag (ARDL) bounds test and vector error correction model (VECM) Granger causality test respectively. ARDL test results suggest that ICT stimulates economic growth in the short-run but not in the long-run, whereas electricity consumption has significant and positive impact on economic growth in the long-run and short-run as well, which supports the energy-led growth hypothesis. However, there is no cointegration when electricity consumption becomes a dependent variable and other variables are independent. Economic growth does not Granger cause electricity consumption in the short-run. These findings suggest that India should focus on ICT expansion to accelerate economic growth in short-run and India should not follow energy conservation policies as it might adversely impact economic growth in both short- and long-run. Instead, India should focus on energy efficient policies. This study has crucial policy implications. Hence, proper balance and coordination among ICT policy, energy policy, and economic growth policy are recommended.