Citation: Dash, Ashutosh, Sangram
Keshari Jena, Aviral Kumar Tiwari,
and Shawkat Hammoudeh. 2022.
Dynamics between Power
Consumption and Economic Growth
at Aggregated and Disaggregated
(Sectoral) Level Using the Frequency
Domain Causality. Journal of Risk and
Financial Management 15: 219.
https://doi.org/10.3390/jrfm15050219
Academic Editor: Anastasios
G. Malliaris
Received: 12 March 2022
Accepted: 29 April 2022
Published: 16 May 2022
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Journal of
Risk and Financial
Management
Article
Dynamics between Power Consumption and Economic Growth
at Aggregated and Disaggregated (Sectoral) Level Using the
Frequency Domain Causality
Ashutosh Dash
1
, Sangram Keshari Jena
2,
*, Aviral Kumar Tiwari
3
and Shawkat Hammoudeh
4
1
Management Development Institute, Gurugram 122007, Haryana, India; ashutosh@mdi.ac.in
2
International Management Institute, Bhubaneswar 751003, Odisha, India
3
Indian Institute of Management, Bodh Gaya 824234, Bihar, India; aviral.eco@gmail.com
4
Lebow College of Business, Drexel University, Philadelphia, PA 19104, USA;
shawkat.hammoudeh@gmail.com
* Correspondence: drsangramkjena@gmail.com
Abstract:
We investigated the Granger causal relationship between the consumption of power both
at the aggregate and sectoral level and economic growth in India using the frequency domain
approach, which would help policy makers seek the efficient allocation of electricity via proper policy
initiatives at different frequencies. We find that at the aggregate level, unidirectional causality runs
from the total power consumption to economic growth, starting from the second up to the seventh
quarter. In the sectoral context, the results are different. Since there is no causality between industrial
power consumption and economic growth; therefore, an energy conservation policy can thus be
implemented for the industrial sector. Moreover, since a bidirectional causality exists after 15 quarters
for the commercial sector, a short-term policy but not an energy conservation policy could also be
initiated for this sector. In the industrial and agricultural sectors, a promotional policy should be
initiated because a unidirectional causality exists from sectoral power consumption to economic
growth. Therefore, different and sector-specific policies would be more appropriate than a single
policy for all power sectors in India in order to orient the efficient utilisation of power towards better
economic development.
Keywords: power consumption; economic growth; seasonal unit roots; frequency domain causality
1. Introduction
The road to better economic growth is paved with an efficient investment and bet-
ter utilisation of infrastructure. Being one of the key infrastructural components, power
(electricity) requires an efficient allocation of capital and other factor utilised in production.
Otherwise, this sector would lead to mounting costs due to a lack of economic competi-
tiveness. Further, as a factor of production, electricity directly or indirectly complements
other factors of production such as labour and capital in the production process. Thus, any
shortages of electricity will disrupt the manufacturing sector of an economy, which conse-
quently may lead to the destabilisation of economic growth (Costantini and Martini 2010).
Since India is an energy-led-growth economy with a perennial problem of power deficit, it
is imperative on the part of policy makers to set out measures for the efficient consumption
of electricity across the consuming sectors in order to boost economic development
1
. For
instance, Chontanawat et al. (2008); Payne (2010); and Ozturk (2010) argue that inefficient
use of energy may negatively impact economic growth. For this reason, it is essential to
know how each consuming sector of electricity contributes to economic growth.
The study contributes to the existing literature in four key areas. (i) It is the first study
that investigates the degree of short-run and long-run causality across different time scales
for each consuming sector of electricity, in addition to the total power consumption in India.
J. Risk Financial Manag. 2022, 15, 219. https://doi.org/10.3390/jrfm15050219 https://www.mdpi.com/journal/jrfm
