Measuring energy efficiency in the context of an emerging economy: The case of indian manufacturing

In recent years the Indian economy has achieved a rapid growth rate. However, one of the challenges facing the economy is the large energy supply that would be needed to sustain this growth path. Hence attaining energy efficiency is crucial for the economy. This paper examines the Indian manufacturing sector and utilizes a variant of the directional distance function to obtain comprehensive measures of performance of the major manufacturing states, given the joint goals of achieving energy conservation and output growth. The results of the empirical application reveal that given the prevailing technology, the average manufacturing firm across the states could reduce energy input and increase output simultaneously by an annual average of 3.84%, by improving technical efficiency. To accommodate a larger simultaneous increase in output and reduction in energy use, India should adopt superior technologies so as to shift the efficient frontier outward.