Energy Consumption and Industrial Growth in Pakistan

Abstract

Industrial growth plays a vital role in the economic development of Pakistan by contributing to employment generation, productivity enhancement, and national income. This study examines the impact of energy consumption on industrial growth in Pakistan using annual time-series data from 1976 to 2024. Industrial growth is measured through industrial value added, while energy consumption is considered the primary explanatory variable. In addition, trade openness, inflation, and labour force participation are included as control variables to capture the broader macroeconomic environment affecting industrial performance. The study employs the Autoregressive Distributed Lag (ARDL) approach to investigate both short-run and long-run relationships among the variables. The empirical findings confirm the existence of a long-run cointegrating relationship between energy consumption and industrial growth. The results indicate that energy consumption, trade openness, and labour force participation positively contribute to industrial development, whereas inflation exerts an adverse effect on industrial performance. The study highlights the importance of ensuring a reliable energy supply, maintaining macroeconomic stability, and promoting trade and workforce development to achieve sustainable industrial growth in Pakistan. The findings provide valuable insights for policymakers in designing effective energy and industrial policies.

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