Carbon emissions, energy use, real GDP per capita and trade matrix in the Indian economy-an ARDL approach

Abstract

The study analyzes the effects of carbon dioxide emissions, energy use, gross fixed capital formation, real GDP per capita, exports and imports on Indian economic growth. The study seeks an answer to the following question: When examining the relationships that exist between these parameters, what are the driving forces behind the growth trajectory of the Indian economy? An ARDL model was applied to the analysis of annual data so as to determine co-integration on variables and the nature of the relationship for the period 1971–2014. Empirically, it was found that in the short-term, Real Gross Domestic Product per Capita (LGDPP) for the Indian economy is affected by its past value, Gross Fixed Capital Formation (LGCAPP), Energy Consumption (LENERP) Carbon Emissions (LCO2P) and Imports (LIMPP); however, in the long-term, Gross Fixed Capital Formation (LGCAPP) and Exports (LEXPOP) played a significant role. The error correction model revealed the existence of some co-integration relationship for the entirety of the variables in the study for the short-term and long-term. It is concluded that policies should have clear alternative renewable energy consumption targets in order to achieve energy efficiency and achieve sustainable growth of the economy, while reducing carbon dioxide emissions.