Mediation of foreign direct investment and agriculture towards ecological footprint: a shift from single perspective to a more inclusive perspective for India

Abstract

According to the Carbon Brief Profile report by Timperley (2019), India has been identified as the world's 3rd largest emitter of greenhouse gases (GHGs) after China and the USA. Following the Paris Agreement and India's pledge as among the stakeholders at the global climate talks and how fast India ratified the Paris Agreement within a year on the 2nd of October 2016, it is essential to investigate the country's (India) commitment in reducing its emission towards enhancing a positive environmental performance. Both structural breaks, linear autoregressive distributed lag (ARDL) and nonlinear autoregressive distributed lag (NARDL), were selected simultaneously for this study, but at a later stage, after being bound to cointegration estimation, the NARDL was dropped because of its inability to sustain the claim of cointegration in the analysis. The rest of the analyses were based on liner ARDL model (short-run and long-run) with diagnostic tests, Granger causality estimation. Ecological Footprint (EFP) was chosen as an indicator to environment because of its richness in measuring the environmental performance. The linear (ARDL) output affirms a positive and significant link among ecological footprint and agriculture, energy use, and population with a negative link between ecological footprint (EFP) and foreign direct investment (FDI). The Granger causality test indicates a one-way transmission passing from agriculture, foreign direct investment, energy use, and population to ecological footprint. Also, a one-way transmission was found passing to economic growth (GDP) from foreign direct investment (FDI) and feedback transmission was found between FDI and energy use. This finding has an implication to both economic and environmental performances; hence, the policy framework should be targeting the enhancement of economy via the foreign direct investment and agriculture with a focus on energy use and environmental performance.