Vol. 1, Issue 4, Part A (2019)

The study used the ARDL and Granger causality test technique to measure the long-run and the short-run and the causal relationships among the selected variables in India during the period 1990-2017. The estimated long-run and short-run coefficients of GDP per capita concerning CO₂ emission is negative and significant, implying that an increase in income per capita does not result in environmental mitigation in the case of India. The estimated coefficient of energy consumption is positive and significant, indicating an increase in environmental mitigation due to an increase in energy consumption in the long-run and short run. The estimated coefficients of financial development are negative and significant, revealing no mitigating environmental quality in the long-run and the short-run. The outcomes of FDI inflows coefficients show a negative and significant association in the long-run, while they establish a positive and significant association in the short-run. Further, the estimated coefficients of trade openness is also negative and significant, revealing no environmental degradation due to a rise in the volume of international trade in the long-run as well as in the short-run. The results of the application of the Granger causality test also show that GDP per capita, energy consumption, financial development and FDI inflows do not Granger-cause environmental emissions. Further, the outcome of the Granger causality reveals that there is a unidirectional causality between trade openness and CO₂ emissions. The above observations indicate that high energy consumption mitigates the environmental quality, but high economic growth requires more energy consumption. Thus, to promote high economic growth, there should be a policy towards the use of alternative sources of energy, namely green and clean energy, nuclear energy etc. to make the growth process sustainable.