Cushioning environmental damage with institutions and FDI: study of sustainable development goals (SDGs)

Abstract

This study examines India's sustainable development with respect to economic and environment development. India is among the largest emerging countries with good economic development prospects. Nevertheless, its environmental development is poor coupled with its position as third in global carbon emission ranking. This peculiarity of Indian economy with increasing emissions has prompted the need for this research into the country's sustainability. Considering the leading role of government in curbing the environmental problems, this study aims to ascertain the India's sustainable development by investigating the role of institutional quality in mitigating its carbon emissions. India's data of 1996Q1 2018Q4 are utilized to investigate the country's sustainable development. Short-run and long-run autoregressive distribution lag (ARDL) dynamic and bound test for cointegration with Granger causality are adopted in this study for better insight on India's sustainable development. Findings from ARDL revealed positive impact of Institutions on environment quality through reduction in carbon emission; however, effect of foreign direct investment (FDI) and fossil fuels shows negative effect on India's environment through increase in carbon emissions. Findings from Granger causality exposed direction of impacts among the variables; hence, nexus is formed among the variables in determining the cause of carbon emissions and environmental damage. The findings from Granger causality give support to the findings from the ARDL analysis pointing towards the need to frame policies capable of mitigating carbon emission and enhances energy transition through institutions.