The study examines how climate variability and environmental pressure interact with macroeconomic conditions to shape sustainable economic growth in India. Using annual data from 1991 to 2023, temperature and precipitation shocks are constructed using the Hamilton filter and analyzed alongside inflation, broad money, interest rates, and carbon emissions. The empirical strategy combines the ARDL bounds-testing approach to identify long-run equilibrium relationships and short-run error-correction dynamics with VAR-based impulse response functions and Granger causality tests to assess dynamic propagation and predictive linkages. The bounds test confirms strong cointegration among the variables. Long-run estimates indicate that real GDP per capita is positively associated with inflation, broad money, carbon emissions, and precipitation shocks, while temperature shocks exert a statistically significant negative effect. Short-run dynamics reveal that temperature shocks reduce output contemporaneously and persist over time, whereas precipitation shocks exhibit an initial positive effect followed by a partial reversal. The error-correction term suggests a moderate speed of adjustment toward the long-run equilibrium. VAR impulse responses validate the persistent dampening effect of temperature shocks on growth. Overall, the findings demonstrate that climate shocks are macroeconomically relevant and cannot be treated as transitory disturbances. Effective sustainability and macro-stabilization strategies in climate-vulnerable economies such as India must explicitly integrate climate risks into growth and policy frameworks.
Verma et al. (Mon,) studied this question.