Impact of Population, Trade Openness, and Foreign Investment on India’s Environment: An Empirical Evaluation of a STIRPAT Model

Abstract

India is excelling in almost all parameters of economic development. However, India is experiencing economic development with a pinch of salt; massive climate and environmental changes are seen. As per Global Climate Risk Index 2021, India was ranked as the 7th worst climate hit country in the world. The present study is an attempt to empirically evaluate the impact of India’s economic growth, population, foreign investment, and trade openness on carbon emissions. The study adopts the STochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) framework augmented with the Environment Kuznet’s Curve (EKC) model with a time series data over the period 1971–2020. Results for unit root testing indicated the presence of mix stationarity for the variables, therefore, the autoregressive distributed lag approach was apt for capturing the long- and short-run dynamics. The results validated EKC for affluence and population. The outcome for FDI inflows and trade openness suggested the presence of pollution haven hypothesis for India. Policy initiatives toward green and sustainable production processes are suggested.