Natural resource dependency and environmental sustainability under N-shaped EKC: The curious case of India

Abstract

Even though the literature is becoming more swamped with research on the causes of environmental degradation, the uniqueness of some nations that strongly emphasize resource depletion has been largely ignored. Following the concept of the Environmental Kuznets Curve (EKC), this study considers the resource richness of India while examining the consequences of natural resource rent (NRR), GDP, and the interaction of NRR and GDP on environmental degradation controlling urbanization and energy use. To this end, we harnessed data from 1970 to 2018 and applied dynamic autoregressive distributed lag (DARDL) simulation and frequency domain causality (FDC) approach. The baseline model reveals that economic activities have heterogeneous yet significant impacts on environmental quality, and we validate the existence of an “N-shaped” EKC hypothesis in India in the presence of CO2 emission as the dependent variable. However, we failed to verify the N-shaped EKC with the ecological footprint as our dependent variable. The natural resource rent, energy consumption, and urbanization are also positively linked to long-term environmental degradation. The interaction term of NRR and GDP positively impacts CO2 emissions and ecological footprint. In addition, the value of the turnaround point was higher with the interaction term compared to that without the interaction term, further indicating the negative externalities of the interaction term. According to FDC's results, a feedback loop between economic development and CO2 emissions is highlighted. The robustness check further endorses the findings of our baseline models. The insights have far-reaching policy implications, discussed in the ultimate section.