Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Electricity Consumption and Economic Growth in Karnataka – isec

Electricity Consumption and Economic Growth in Karnataka

Abstract

The paper aims to study the trend and pattern of electricity consumption in Karnataka, to investigate the direction of causality between electricity consumption and economic growth, and to forecast the future electricity consumption in the state. The methodology used for causality test is Granger causality test, while forecasting is done through ARIMA modelling. The trend and pattern of electricity consumption in Karnataka reveals that the value and share of consumption by the ‘Agriculture’ category is higher than that by ‘Industries’ and ‘Commercial’ consumers. Since the former category is highly subsidised by the state government and partly cross-subsidised by the latter categories which pay higher-than-cost tariff, the current trend is not ideal for revenue realisation of the power utilities as well as for state finances. Empirical results further show there is unidirectional Granger causality from economic growth to electricity consumption in Karnataka. Hence, economic growth will induce higher electricity consumption in future. Lastly, the electricity consumption is predicted to be around 90645 GWh by 2020, which would require significant investment and supply planning, as there is still a power deficit of about 13.9% in 2012-13.

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