Economic growth and Energy consumption nexus in Developing World: The case of China and India

The global energy demand is continuing to grow unabated and all eyes are on the two most developing nations India and China. Here an attempt is made to study the causal relationship between energy consumption (electricity, coal and petroleum) and economic growth for India and China in a VECM framework. Findings suggest the existence of the long run relationship amongst the various forms of energy consumption and economic growth in both the countries. In case of India a bidirectional causality running between coal consumption and economic growth is observed not only in the short run but also in the long run. A unidirectional causality is observed from petroleum consumption to economic growth both in short run and long run in case of India. However for China, unidirectional causality is observed from economic growth to coal consumption and from petroleum consumption to economic growth in both short run and long run.