Convergence of energy productivity across Indian states and territories

The Indian government has a number of ambitious economic and energy related initiatives including increasing access to electricity (“24X7 Power for All”), greater economic activity from manufacturing (“Make in India”), and reducing carbon dioxide emissions. Energy productivity is an important factor in helping to achieve these objectives. In this paper, we test the hypothesis of energy productivity convergence in a panel of contiguous states and territories (S&Ts) in India. In measuring energy productivity at the S&T level, we use a unique firm-level dataset maintained by the Centre for Monitoring Indian Economy (CMIE) for the period 1988 to 2016. We identify convergence clubs across Indian S&Ts; i.e. we identify groups of states that converge to different equilibria. The findings from the club merging analysis show that energy productivity across the S&Ts converges into two clubs with one divergent club. Higher initial energy productivity makes it more likely for states to be in the high energy productivity club. Industry structure is also an important determinant. The club convergence of the S&Ts has implications for Indian energy policy.