Financial development, energy consumption, and economic growth: Some recent evidence for India

Abstract

The objective of this study is to investigate the empirical relationship between financial development, energy consumption, and economic growth in India, spanning the time period 1970–2018. The study used ARDL-bound tests and the VECM method. Results confirm the presence of a long-term relationship among variables. Results from the Granger causality test show a unidirectional relationship, from economic growth to financial development, in the short-term. However, in the long-term, we identify a bidirectional causal relationship between economic growth and energy consumption and energy consumption and financial development. The study concludes that financial development and energy consumption are the key drivers of the economic growth of India.