Examining the Dynamic Nexus Between Income and Carbon Emissions with R&D Spending for Environmental Sustainability: Insights from Indian States

India has been witnessing a high growth rate of aggregate income in the current era of globalization. Even though the per capita income is yet to catch up, this led to an improved global status in 2025, with India becoming the fifth largest economy in terms of aggregate GDP. However, the economic gains have been accompanied by a host of environmental problems. In particular, the increase in carbon emissions is emerging as the biggest challenge in achieving the Sustainable Development Goals by 2030. While some national policy initiatives exist, Indian states have also started implementing new public policies for a contextualized environmental management at a sub-national level to curtail the negative impact of carbon emissions on sustainable development. In this context, this study seeks to explore three aspects: first, the characteristics of the series for per capita CO2 (PCCO2) emissions, per capita state domestic product (PCGSDP), and per capita R&D (PCR&D) spending aimed at safeguarding the environment in Indian states; second, the prevalence of both enduring and near-term linkages among the three variables in distinct panels; and third, the constantly changing interplay involving income and carbon emissions in the midst of R&D spending for the environment in the Indian states from 2008–2025. While the series for PCGSDP and PCR&D is seen rising along with PCCO2 in most states, there are some exceptional states like Delhi and Kerala where trends of PCCO2 are falling. The panel cointegration and VECM results show that the three indicators, viz., income, PCCO2 and R&D spending, have a stable long-run relationship, and that income and R&D cause CO2 emissions in all states’ panels and the panel of developed states. Using several polynomials between the income and CO2 emission nexus over several panels of states and using panel cointegration techniques, the study reveals that static panel fixed effects models are most appropriate in the case of all states’ panels and the panel of developed states to establish an inverted Environmental Kuznets Curve (EKC), and that R&D spending has worked as a significant control variable to justify the declining shape of the EKC. The study recommends a continuous increase in R&D spending by all states of any development stature to achieve sustainable development in the earliest possible time.