HOW THE ENERGY SECTOR IS AFFECTING ECONOMIC GROWTH – COMPARING THE UNITED KINGDOM WITH INDIA

Abstract

A country's economy depends heavily on energy. Economic productivity and industrial growth depend on the use of energy in modern economies. In a modern economy, energy accounts for more than one-tenth of production costs but contributes to most industrial growth, according to Barney and Franzi (2002). The economy’s need for energy has grown at about the same rate as wealth. It is a fact that wealth creation is predominantly determined based on the usage of energy by society. At the beginning of the 19th century, biomass was the preferred choice of fuel. Energy demand in the West and advanced economies increased more rapidly because of rising standards during the end of the 20th century. In most production and consumption activities, energy plays a significant role in economic growth. An analysis of the energy sector components and their impacts on economic progress in two countries, the United Kingdom and India, was conducted based on an analytical approach. It is found that in both countries energy efficiency and foreign direct investment (net inflows) are positively correlated. Both the United Kingdom and India exhibit significant correlations between energy efficiency and GDP (percentage of GDP). Employment rates and energy efficiency go hand in hand in both countries. India's GDP per capita growth (annual %) is positively correlated with energy efficiency (0.447). This study follows only the economic indicators from the World Bank Development Indicators report.

Data:
Received: 24 Jan 2023
Revised: 16 Mar 2023
Accepted: 17 Apr 2023
Published: 1 May 2023