Analysing the impact of the financial sector, open economy, and climatic factors on agriculture value added in India—an ARDL approach

Agriculture is considered a key driver of economic development for advanced and emerging nations. It acts as a major driver for growth and institutional change, laying the groundwork for economic diversification and sustainable growth. However, the complicated linkages between financial development, an open economy, and environmental factors in agriculture remain under research. The goal of the current study is to determine the effect of financial development factors such as gross capital formation, money supply, and domestic credit; open economy factors including foreign direct investment (FDI), trade (Tr), and exchange rate (ER); and environmental factors such as CO 2 emission (CA), rainfall (RN), and temperature (TEM) along with gross domestic product on agricultural value-added within the Indian framework using the data over 33 years from 1991 to 2023. The ARDL model was employed to investigate the variables' short- and long-term association. Results show that GDP (1.32) has the highest impact on AVA, followed by FDI, carbon dioxide emission, rainfall, and GCF. In the short run, rainfall (0.86) has more effect, followed by FDI, GCF, GDP, and temperature. Exchange rate and domestic credit show negative short-run effects but are statistically insignificant, while trade exerts a negative influence in both periods, though effects were estimated in aggregate without disaggregation of export and import components. Carbon dioxide emission also negatively influences (−0.13) in the short run. Bidirectional causality among AVA with FDI and GDP and a unidirectional association of AVA with trade, rainfall, temperature, and carbon dioxide are found. The results indicate the importance of targeted policy measures to enhance agricultural infrastructure, attract sustainable FDI, and strengthen financial inclusion while ensuring climate resilience. The study highlights the delicate balance among economic development, environmental sustainability, and agricultural growth, advocating for strategic investments, policy reform, and institutional strengthening to support long-term agricultural productivity in India. JEL classification : C01, C22, O13, O13