Energy Crisis: Effects on Industrial Growth of Pakistan

Abstract

This study investigated the impact of electricity shortage on industrial growth of Pakistan for the time of 1989 to 2022. Industrial sectors transform economy from raw material base to a more active, advance, and productive economy. So, for the economy to attain economic growth it is necessary to have a well-developed, vibrant and efficient industrial sector. But due to the severe electricity shortage the industrial growth rate decreases from 7.2 percent in 2022 to 7.8 percent in 2021. The electricity shortage found worst all the time in 2011 and it caused a huge loss to industrial sector. Due to the important role of electricity in industrial sector, the study investigated the long run relationship among the desired variables including Industrial output Growth Rate, Electricity Shortage, Gross Fixed Capital Formation, Industrial Growth Rate of Electricity Consumption, Industrial Consumption of Oil, and Industrial Imports. After checking stationarity of the data ARDL technique was conducted and found that Electricity Shortage and Industrial Imports have negative and significant impact on Industrial output Growth Rate. Industrial Annual Growth Rate of Electricity Consumption, Gross Fixed Capital Formation and Industrial Consumption of Oil have positive and significant impact on Industrial output Growth Rate in long run. In short run the model is in State of disequilibrium but is going to restore very quickly during this period