Economic Growth and Environmental Degradation in India: Testing the Environmental Kuznets Curve Hypothesis (1990–2023)

Abstract

This paper examines the relationship between economic growth and environmental damage in India through the lens of the Environmental Kuznets Curve (EKC) hypothesis and the years 1990 to 2023. The analytical framework is based on robust econometric methods, including unit root tests, Johansen cointegrated tests, vector error correction model (VECM) and fixed/random effects modelling on panels to determine linear or non-linear relationships between the economy and environment. The results indicate that there exists a non-linear EKC where CO₂ emissions rise with increasing output until reaching a significant threshold after which they fall with continued output expansion. Specifically, the EKC turning point is estimated to occur at a per capita GDP of approximately $6,500-$7,200 indicating that beyond this threshold, continued income growth no longer contributes to environmental degradation. Long run elasticities indicate that a 1% increase in per capita GDP results in an increase in CO₂ emissions of approximately 0.42% during the earlier phases of development, but once the threshold is passed, an additional 1% increase in per capita income results in a decline in CO₂ emissions of approximately 0.18% due to both energy efficiency gains and structural shifts. Results from the panel models support the uniformity of these effects across regions, while tests for Granger causality support the presence of reciprocal causal relations between GDP and CO₂ emissions.The research places significant emphasis on energy transition, regulatory quality and technological innovation as factors that greatly contribute to overall sustainable development. The results show a wealth of empirical knowledge that can be used by researchers and policymakers in support of India's transition toward a low carbon economy, which will support both national and global climate policy objectives under the United Nations Sustainable Development Goals (SDGs).