Acute shortage of energy sources in developing countries in
general and South Asian countries in particular has shown that energy
has become a binding input for any production process. Nowadays
operation of heavy machinery and electrical equipment, and
transportation of raw material and final products from their place of
origination to their destination require heavy consumption of energy in
one form or the other. Therefore, energy consumption that was previously
ignored in the production function of a firm and an economy is now
considered a vital input in production process. It affects GDP directly
as by increasing energy consumption; more output can be produced with
given stock of capital and labor force in a country. Also uninterrupted
availability of energy at reasonable cost improves competiveness of home
products in international markets and thus increases exports of home
country a great deal. Resulting increase in net exports further adds to
the GDP through multiplier effect