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2021 | OriginalPaper | Chapter

Renewable Energy in India: What It Means for the Economy and Jobs

Authors: Meeta Keswani Mehra, Saptarshi Mukherjee, Gaurav Bhattacharya, Sk. Md. Azharuddin

Published in: Sustainable Development Insights from India

Publisher: Springer Singapore

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Abstract

The paper is an attempt to relate renewable energy (RE) diffusion to important macroeconomic variables for India. It has utilized macroeconometric time-series methods to estimate the potential for RE diffusion by capturing its temporal movement with respect to variables such as gross domestic product (GDP), population, fiscal deficit, call money rate, energy imports and unemployment rate. An auto regressive distributed lag (ARDL) model has been estimated, which is then used to forecast the RE potential under three alternative cases—business-as-usual, optimistic and pessimistic. The ARDL model estimation pointed towards an equilibrium co-integrating long-run relationship between RE and key macroeconomic variables. The long-run level of GDP, call money rate and the ratio of renewable energy to fossil energy tariffs were found to be positively associated with RE diffusion, while fiscal deficit, net energy imports, population access to electricity, population level and unemployment displayed a negative relationship with RE. It has also been found that, relative to the initial official target of RE capacity of 175 GW by 2022 (recently revised to 225 GW) of the Indian government, these are likely to be achieved later in time. Further, the contribution of the RE sector to cumulative job creation in 2042 has been assessed at around 4390 thousand, 5055 thousand and 2227 thousand in the case of business-as-usual (BAU), optimistic and pessimistic scenarios, respectively. Thus, besides energy and environmental security, RE could offer significant employment co-benefits to the macroeconomy of India. This is especially promising given the need for quick recovery of the Indian economy in a post-COVID-19 period.
Footnotes
1
In one such statement, the World Bank Chief Economist for South Asia, Hans Timmer seems to suggest that, in the short run, India ought to start planning for a growth rebound, involving creation of new job opportunities, particularly at the local levels, coupled with the financial programs to avert bankruptcies, especially of the small- and medium-sized enterprises. In the longer run, one needs to perceive this as an opportunity for course correction and progressing the Indian economy on a sustainable growth path, both fiscally and socially (ET, 13 April 2020).
 
2
Stationarity implies the basic properties of the distribution, such as the mean, variance and covariance, remaining constant over time. The innovative work for deriving unit-root test in time series was done by Dickey and Fuller (Fuller, 1976; Dickey & Fuller, 1979).
 
3
Granger causality is a statistical concept of causality that is based on the prediction of a time series by using prior values of another time series.
 
4
ARDL models are standard least squares regressions that include lags of both the dependent variable and explanatory variables as regressors (Greene, 2008).
 
5
Basically, this test is an expanded version of the Augmented Dickey–Fuller test, where the time series are transformed through generalized least squares (GLS) regression before doing the test.
 
6
1 lakh = 105 and 1 crore = 107.
 
7
The Indian economy is assumed to contract by 3.2% according to Global Economic Prospects, June 2020, a World Bank group’s flagship report. Following this we have assumed a 3% contraction in the Indian economy for our analysis.
 
8
During January 2020 and February 2020, the unemployment rate in India was 7.2% and 7.7%, respectively (CMIE), even though during March, April, May and June, unemployment is expected to rise sharply but may decrease in the later part of the year as the economy is expected to have a strong recovery later (India’s economy will see strong recovery next year- S&P, RT, 15 June 2020, https://​www.​rt.​com/​business/​491827-india-economy-strong-recovery/​), accessed 20 Jun 2020. Thus, unemployment for the entire year is assumed to be 8% under BAU.
 
9
Draft National Energy Policy, NITI Aayog, GOI (Version as on 27.06.2017). It says that “by 2040 a likely capacity (for renewables) of 597–710 GW is expected to be achieved”, page 41, Chapter 6, Sect. 6.1.
 
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Metadata
Title
Renewable Energy in India: What It Means for the Economy and Jobs
Authors
Meeta Keswani Mehra
Saptarshi Mukherjee
Gaurav Bhattacharya
Sk. Md. Azharuddin
Copyright Year
2021
Publisher
Springer Singapore
DOI
https://doi.org/10.1007/978-981-33-4830-1_17

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