Dynamics of Coal Consumption and Economic Growth in Indian Economy: An Empirical Study (1980–2024)

Abstract

The present study, “Dynamics of Coal Consumption and Economic Growth in Indian Economy: An Empirical Study (1980–2024),” investigates the dynamic relationship between coal energy use and India’s economic performance over a forty-four-year period. Recognizing coal’s dominant role in powering industrial and infrastructural development, the study seeks to determine whether coal consumption contributes to economic growth, whether economic expansion increases coal demand, or whether both phenomena reinforce each other. Conducted in the Department of Economics, Annamalai University, the study utilizes annual secondary data from 1980 to 2024 collected from the World Bank, Reserve Bank of India, and the Ministry of Coal. Employing a quantitative time-series approach, the research applies several econometric techniques, including the Augmented Dickey–Fuller (ADF) test for stationarity, Johansen cointegration test, Autoregressive Distributed Lag (ARDL) bounds testing, Error Correction Model (ECM), and Granger causality analysis. These methods assess both short-run and long-run relationships among GDP, coal consumption, capital formation, and labour force. The empirical findings indicate a significant long-run equilibrium relationship between coal consumption and GDP, confirming that both variables move together over time. The Granger causality results reveal bidirectional causality, suggesting mutual dependence between energy use and economic activity. The ECM coefficient (–0.412) demonstrates that 41% of any short-run disequilibrium adjusts each year toward long-run stability. Overall, the study concludes that coal remains a critical driver of India’s economic growth; however, its heavy reliance raises sustainability and environmental concerns. The findings emphasize the need for policy interventions that promote clean coal technologies, strengthen renewable energy integration, and enhance overall energy efficiency. These policy implications are vital for achieving India’s long-term vision of sustainable energy security, economic resilience, and environmental stewardship.