CAUSAL RELATIONSHIP BETWEEN THE PERFORMANCE OF MANUFACTURING AND ENERGY SECTOR: CURRENT SCENARIO OF INDIAN ECONOMY Shivani Jaswal, Keerti Singh and Japneet Kaur Assistant Professor(s), Amity School of Economics, Amity University, Noida, India. Email-id: 310861@soas.ac.uk Abstract Economic development has often been associated with the performance of the manufacturing sector. Current slowdown of Indian manufacturing has been the centre of economic debate. This paper dwells into the complexities of the Indian manufacturing sector highlighting its relation with the power sector. The study emphasizes that sluggish performance of manufacturing is attributed to the retarded growth of Indian power. Due to the insuficient energy resources, growth of Indian manufacturing has faced tremendous challenges. The study recommends that higher productivity in the power sector through lowering transmission losses and increasing investment in renewable sources may act as a stimulus for both Indian power and manufacturing sector. Keywords: Indian Manufacturing, Indian Power, Causal Relationship Acknowledgement This paper was presented at the ‘Tenth AIMS International Conference on Management’, January 6-9, 2013 held in Bangalore (Paper Reference Number: A371) and this is the extended version of the paper. Introduction The causal relationship between energy consumption and GDP output or income is a well-studied topic in the literature of energy economics. The causality is in the sense of Granger causality test (introduced by Granger, 1969) portrayed a unidirectional causality running from GNP to energy consumption for the United States (Kraft and Kraft 1978). However, different results for different countries as well as for different time periods within the same country were pointed out by economists like Akarca and Long (1980). In most recent studies like those put forward by Yu and Jin (1992); Masih and Masih (1996, 1997); Glasure and Lee (1997), researchers have focused on the co-integrating relationship between energy consumption/output among some of the fast developing economies like India and China. Economists have time and again focused their research in establishing the relationship between energy and manufacturing sector. This is because the performance of energy sector has often been associated with the performance of the manufacturing sector. The sudden dip in the Indian GDP growth rate in the mid 2011 to nearly 6 percent triggered serious thought process among the Indian manufacturers and Government. This current slowdown of Indian manufacturing has now become the centre of economic debate. This paper dwells deeper into the complexities of the Indian manufacturing sector highlighting its relation with the power sector. The study emphasises that sluggish performance of manufacturing is attributed to the retarded growth of Indian power. Due to the insuficient energy resources, growth of Indian manufacturing has faced tremendous challenges. The next section details the various literature reviews that have been put forward over the years to establish the relation between the development of manufacturing sector and performance of power industry. The subsequent section details the performance of Indian manufacturing sector over the past few years indicating that the growth of the sector has been largely stagnant or even diminishing. The latter section then discusses the performance of Indian energy sector and link its performance to that of manufacturing sector. The study inds that the sluggishness in the power sector has been one of the major causes for the slow GDP growth which is being experienced by India. Finally in the last section the study recommends that higher productivity in the power