PRIMARY ENERGY, INCOME, FOREIGN DIRECT INVESTMENT (FDI), AND HUMAN CAPITAL IN INDIA: A MULTIVARIATE ANALYSIS
DOI:
https://doi.org/10.15173/esr.v21i1.2532Abstract
This study investigates about the primary energy consumption function of the Indian economy through cointegration and causality analyses over the period 1970 to 2009. The study employs the bounds-testing procedure for cointegration to examine the potential long-run relationship, while an autoregressive distributed lag model is used to derive the short- and long-run coefficients. The Granger causality test is applied to determine the causal direction between electricity consumption and its determinants. The study finds that, primary energy consumption, income, foreign direct investment (FDI) and human capital are cointegrated. Further results show that, the entry of FDI is positively related to primary energy consumption in India, whereas the impact of human capital is negative, but insignificant and the Granger causality evidence indicates bidirectional causality between FDI and primary energy consumption and no causality between GDP and primary energy consumption. Additional results show that an increase in the human capital reduces the primary energy consumption and also reduces the influx of FDI.
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