The paper is an attempt to relate renewable energy (RE) diffusion to important macroeconomic variables for India. It has utilized macroeconometric time-series methods to estimate the potential for RE diffusion by capturing its temporal movement with respect to variables such as gross domestic product (GDP), population, fiscal deficit, call money rate, energy imports and unemployment rate. An auto regressive distributed lag (ARDL) model has been estimated, which is then used to forecast the RE potential under three alternative cases—business-as-usual, optimistic and pessimistic. The ARDL model estimation pointed towards an equilibrium co-integrating long-run relationship between RE and key macroeconomic variables. The long-run level of GDP, call money rate and the ratio of renewable energy to fossil energy tariffs were found to be positively associated with RE diffusion, while fiscal deficit, net energy imports, population access to electricity, population level and unemployment displayed a negative relationship with RE. It has also been found that, relative to the initial official target of RE capacity of 175 GW by 2022 (recently revised to 225 GW) of the Indian government, these are likely to be achieved later in time. Further, the contribution of the RE sector to cumulative job creation in 2042 has been assessed at around 4390 thousand, 5055 thousand and 2227 thousand in the case of business-as-usual (BAU), optimistic and pessimistic scenarios, respectively. Thus, besides energy and environmental security, RE could offer significant employment co-benefits to the macroeconomy of India. This is especially promising given the need for quick recovery of the Indian economy in a post-COVID-19 period.
Renewable Energy in India: What It Means for the Economy and Jobs