An ARDL Approach to Foreign Direct Investment Inflows, Economic Growth & Co2 Emissions in India

Abstract

This research critically explores the correlation within the gas emissions, “foreign direct investment (FDI)” inflows, and economic growth in India. In order to achieve this, the study adopts the “Auto Regressive Distributed Lag (ARDL)” bound testing approach and Granger Causality test using time series data from 1990 to 2019. The observed outcomes demonstrate that the variables are co-integrated, demonstrating the presence of both long-term and short-term linkages among them. The study reveals that economic growth and FDI inflows positively contribute to CO2 emissions in both the persistent and temporary contexts in India. Additionally, FDI exerts a positive influence on the country's economic growth in both the long-run and short-run. The Granger causality test similarly approves the presence of one-way causality: FDI drives economic growth, FDI impacts CO2 emissions, and economic growth affects CO2 emissions.