On the environmental effects of development and non-development expenditure in India: Evidence from an asymmetric ARDL model

The main purpose of this study is to model and measure the impact of development and non-development expenditure on the carbon dioxide emissions (per capita metric tons) in India over 1980-2018. The Asymmetric ARDL approach (NARDL), an advanced econometric technique, was applied to examine the nexus between CO2 emissions, development and non-development expenditure, national income, energy consumption and population. The short-run and long-run results establish a statistically significant relationship between carbon emissions and the explanatory variables. The long-run asymmetrical results indicate that energy consumption and national income growth pollute the environment. However, we did not find any significant long-run impact of population on pollution levels in India. Furthermore, the results reveal that increase in development expenditure leads to environmental degradation and non-development expenditure mitigates pollution. No evidence of the applicability of EKC was found in India. The authors conclude that a reasonable method of tackling the threat of environmental degradation is to remove distortions in public expenditure policy. We recommend the government to phase out fiscal benefits to pollution-prone economic activities and thus spend the money saved on pollution abatement efforts.