Impact of Inflation and Economic Growth on Environmental Sustainability of the Indian Economy

Exponential growth of economic activity and high inflation are the major factors to contribute the decoration of environmental sustainability. The main objective of this study is to examine the effect of economic growth and the inflation on the level of CO2 emission, and secondly, to explore the evidence of Environmental Kuznets Curve (EKC) hypothesis in Indian Scenario over the period from 1970 to 2022. We employed ARDL and Non-linear ARDL (NARDL), which allow to capture both the long as well as short-run interdependency, in addition to that the NARDL able to capture the asymmetric effect of GDP and Inflation on the CO2 emission, with different specification in long and short-run equation. We include some factors which controlling the level of emission such as Consumption of Natural Resources (TNR), Consumption of Natural Gas (NGasCon) and Electricity (ElectCon) to obtain accurate inference about the study. The empirical analysis found the positive association of both the economic development (GDP growth) and the Inflation towards the CO2 emission in long-run. Implies the higher inflation and the substantial economic activities leads to the deteriorate the quality of environment. The result of NARDL reviles, neither short- or long-run asymmetric from negative and positive shock of GDP and Inflation, though some extend significant and negative effect of negative inflation reported. Overall, the hypothesis of EKC i.e., inverted U-shape in the association between economic growth and the quality of environment is not satisfying. JEL Classification : G0, C12, O44