Introduction to the E3-India Model

Abstract

This chapter provides a detailed summary of the E3-India model used in all the chapters of the book. E3-India is a macro-econometric model covering 32 States and Union territories and 38 economic sectors in India. It is used for economy-energy-environmental impact analysis of new and existing policies, thus providing recommendations for policy-making at the sub-national level. This chapter provides a comprehensive overview of the basic structure and working of the model before readers proceed to further chapters, in order to understand the dynamics of the simulations undertaken for impact assessment of various economic policies.

Appendices

Appendix I

Using the Model Further

The E3-India model is currently available to use for research purposes free of charge. After free registration, it may be downloaded from the model webpage: https://www.e3indiamodel.com/.

The model comes with a basic interface called the ‘manager’ that allows the user to design, run and assess scenarios. For example, it is possible to assess the effects of carbon taxes using the interface, without needing to understand any model code. The interface automatically generates line charts of time series, showing levels and differences from baseline. All numerical outputs can be exported to spreadsheet files.

The model manual provides an introduction to the model interface and describes how to get started using the model. The website provides contact details for obtaining further support using the software.

Appendix II

As noted in the main text, E3-India consists of a combination of identity, accounting equations and behavioural equations in which elasticities are estimated using econometric techniques. This appendix covers the equations in both cases, giving the formal definitions as specified in the model’s own variables. Each equation is defined at the regional level, i.e. for the 32 states and union territories and described in the appendix tables. Further information about each of the equations is provided in the model manual (Cambridge Econometrics, 2020).

Accounting Identities

Tables 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, and 2.8 show the key accounting relationships in the model.

Table 2.2 GDP

Table 2.3 Output by product (demand side)

Table 2.4 Output by sector (supply is set to match demand)

Table 2.5 Value added by sector

Table 2.6 Consumer prices

Table 2.7 The consumer price index

Table 2.8 Household real incomes

The Econometric Equations

Tables 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.18, 2.19, 2.20, and 2.21 summarise the econometric behavioural equations in E3-India. The tables provide a simplified representation of the error-correction model that is used. Further information about the functional form of the equations is provided in the model manual.

Table 2.9 Aggregate energy demand by sector

Table 2.10 Energy demand by fuel and sector (solid, liquid, gas and electricity)

Table 2.11 Aggregate household spending

Table 2.12 Disaggregate household spending

Table 2.13 Industrial investment

Table 2.14 International exports

Table 2.15 International imports

Table 2.16 Export prices

Table 2.17 Import prices

Table 2.18 Domestic industry prices

Table 2.19 Employment by sector

Table 2.20 Wage rates by sector

Table 2.21 Labour market participation rates