Economics at your fingertips  

Implications of energy subsidy reform in India

Rajesh H. Acharya and Anver C. Sadath

Energy Policy, 2017, vol. 102, issue C, 453-462

Abstract: This paper analyses welfare impact of energy subsidy reform in India based on the data from 1970‐ 71 to 2014‐ 15. To this end, Auto Regressive Distributed Lag (ARDL) model and Error Correction Model (ECM) have been estimated to quantify the short-run and long-run price and the income elasticity of various energy products. The results show that the price elasticity of demand for all fossil fuels is low, but the respective income elasticity is higher. Therefore, an increase in the general price level caused by the subsidy reform will lead to the erosion of real income and will have related welfare implications in India. The results also reveal that energy expenditure will obviously increase and hence energy consumption will decline depending upon the extent of the withdrawal of subsidy. Therefore, policy makers in India, while undertaking further reforms, must ensure that the subsidy reaches to those who truly deserve, so that the socioeconomic casualty of reforms can be minimized along with achieving fiscal goals.

Keywords: Energy subsidy; Elasticity; Auto Regressive Distributed Lag (ARDL) Model; Error Correction Model (ECM) (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-12-16
Handle: RePEc:eee:enepol:v:102:y:2017:i:c:p:453-462