Energy Elasticity in India: An Empirical study with Unit level Household Data

Abstract

In the present study an attempt has been made to estimate the responsiveness of prices and household expenditure on consumption of energy for cooking and lighting at household level in rural and urban areas of All India. Household level energy elasticities are estimated for the rural and urban areas with the help of dummy variable regression approach by using NSSO 66th quinnquenial rounds of unit level data.. The results reveal the fact that average expenditure recorded on energy for cooking and lighting in urban areas is higher than in rural areas at all India level. Majority of the households are using dirty fuel for cooking in rural areas while in urban areas clean fuel i.e. LPG is used for cooking. The expenditure on energy for cooking and lighting at household level is inelastic. The marginal budget share in rural and urban areas is the same. Result reveal the fact that hundred percent increase in prices of energy for cooking and lighting will increase the expenditure of households in rural region more than in urban region.