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.