Reinvestigating the Role of Coal Consumption in Indian Economy: An ARDL and Causality analysis

Abstract

The present study investigates the role of coal consumption on the economic growth in India from 1980-2016. We use panel data estimation techniques for long run and VECM Granger causality for short run analysis to find the direction of causality between coal consumption and economic growth. The model specification also incorporates the urbanization, labor, fiscal deficit and service sector value added. In long-run analysis, the results confirm the unidirectional relationship from economic growth to coal consumption. On contrary, in short-run, bidirectional causal relationship between coal consumption and Indian economic growth confirms that higher coal consumption supports the Indian economy through energy. Furthermore, bidirectional causality is confirmed between economic growth and population; besides, the results show the unidirectional causality from service sector to economic growth.