Abstract
The paper empirically investigates the dynamic relationships between economic and environmental performances in manufacturing industries on a comparative basis in India and China. The economic performance is generally measured by production and export. Manufacturing sector plays a crucial role in terms of GDP and export both in India and China due to existence of their emerging markets. The rapid export-led economic growth with remarkable contributions of manufacturing industries in India and China also raise the question of their environmental performances nowadays. In this context, environmental effect of manufacturing performances measured by the CO2 emission is a serious concern for both countries. The study is conducted within a causality framework by using World Bank data on Indian and Chinese economy from 1970 to 2016. Several unit root tests are conducted for all time series variables before applying the Johansen co-integration test followed by vector auto regression models to find their causal relationships. Findings show a unidirectional causal linkage between manufacturing production and CO2 emissions in both countries, the degree of the effect of manufacturing sector on CO2 emissions is remarkably higher in China than in India. Manufacturing export is also found as a significant factor in high level of CO2 emissions in China.
Highlights
India and China had almost the same GDP per capita in 1990
This paper has looked at the effects of CO2 emissions released due to energy consumption for rapid economic growth leading to environmental degradation in India and China
This study differs from the others as we have tried to see the rate of CO2 emissions in case of India and China
Summary
India and China had almost the same GDP per capita in 1990. The economy of China has been growing much faster than India and GDP per capita by its manufacturing sector on a purchasing power parity (PPP) basis is 90 percent higher than GDP per capita by manufacturing sector in India. As per World Bank data, CO2 emissions of India have increased by around 22 percent from 2007 to 2013 whereas in case of China the rate of increase in CO2 emissions was approximately 30 percent over the same period Both India and China have been the emerging suitable destinations for the investments of foreign capital by the Multi-National Enterprises (MNEs). The study of Low and Yeats (1992) confirmed the hypothesis of displacement Against this backdrop the paper examines the dynamic relationships on a comparative basis among the performances of manufacturing industries in terms of production, export, and CO2 emissions from manufacturing industries in India and china using the data from Word Development Indicators (2017) of World Bank from 1970 to 2016.
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