Energy has long been acknowledged as one of the most important inputs for a country's economic and social development. India, as one of the world's largest and fastest-growing developing countries, is facing an oncoming energy crisis that necessitates prompt policy and technology action. According to the GoI statistics, the manufacturing sector is the largest consumer of commercial energy in India.
India's manufacturing sector is one of the most energy-intensive in the world, and it is quickly expanding, with significant consequences for the global energy market and climate change, since India continues to rely on non-renewable energy sources for the majority of its energy dependency.
This study attempts to analyze the determinants of energy intensity and rate of change of energy intensity of Indian manufacturing firms and its sub-sectors such as the chemical products, construction materials, consumer goods, food products, machinery, metals, textiles and transport equipment using data from the PROWESS database of the Centre for Monitoring Indian Economy (CMIE) from 2010 to 2019.
The results of the econometric analysis suggest a non-linear (U-shaped) relationship between energy intensity and firm size for the consumer goods, food, machinery, and metals sectors. In contrast, we discovered an inverted U-shaped relationship between energy intensity and firm size in the textiles and transportation sectors. We also discovered an inverted U-shaped relationship between firm age and energy intensity in the entire manufacturing firms.
The analysis also highlights that foreign-owned firms are less energy-intensive than domestic firms for the construction materials and transport equipment sectors. The outsourced professionals can help decrease the energy intensity for the sectors like chemical products, consumer goods, machinery, metals, and transport equipment. IT-enabled services can contribute to decreasing the energy intensity for the construction material sector only.
The analysis also identifies that younger firms are more energy-efficient than older firms for entire manufacturing firms and sub-sectors like chemical products, machinery, and metals.
In addition, labour, capital, repair, raw material, research & development intensity, and size are determinants of energy intensity for energy-efficient firms.