Impact of inflation and economic growth on environmental sustainability of the Indian economy

The growing tension between macroeconomic stability and environmental sustainability has become a central concern for emerging economies like India. This study examines the impact of economic growth and inflation on environmental sustainability, proxied by CO 2 emissions, over the period 1970–2022. Using both Autoregressive Distributed Lag (ARDL) and Non-linear ARDL (NARDL) models, the study captures short-run and long-run dynamics, as well as potential asymmetric effects of economic growth and inflation on emissions. The analysis incorporates key control variables, including natural resource rents, electricity consumption, and natural gas consumption, to enhance robustness. The empirical findings of ARDL model, reveal a significant positive relationship between economic growth, inflation, and CO 2 emissions in the long run, indicating that both higher economic activity and inflationary pressures contribute to environmental degradation. In the short-run, inflation exhibits a negative association with emissions, suggesting that inflationary conditions may temporarily suppress environmental degradation through reduced economic activity. However, the NARDL results do not provide strong evidence of asymmetry, indicating that positive and negative shocks in growth and inflation have broadly similar effects on CO 2 emissions. Nonetheless, some evidence shows that negative inflation shocks reduce emissions in the short-run, suggesting temporary environmental improvement during disinflation. The findings underscore the need for integrated policy measures that balance economic growth with environmental sustainability. In particular, effective inflation management and a transition toward cleaner energy sources are critical for achieving sustainable development in India.