Is India Financing Its Emissions Through External Debt?

Abstract

The main aim of this study is to analyze the effect of external debt on different types of emissions in India as carbon dioxide emissions, methane emissions, emissions from liquid fuel consumption, emissions from solid fuel consumption, and emissions from gaseous fuel consumption. India has a fast growing in external debt especially after 2008 world financial crisis. India has a similar situation to China and Turkey which also started to increase external debt significantly after 2008 world crisis. The effect of external debt on emissions only analyzed by Katircioglu and Celebi (2018), Beşe, Friday, and Ozden (2021) and Beşe, Friday and Spencer (2021) for Turkey, China and Brazil respectively. This study aims to fill the gap in the literature by analyzing the effect of external debt on emissions. This study is the first study in the literature for India. The second aim of the study is to investigate whether inverted U relationship exists between economic development, and carbon oxide emissions, methane emissions, methane emissions, emissions from liquid fuel consumption, emissions from solid fuel consumption, and emissions from gaseous fuel consumption. This study confirmed inverted-U relationship between methane gas emissions and economic development, and emissions from gaseous fuel consumption and economic development. The positive and significant effect of external debt on carbon dioxide emissions, methane emissions, emissions from gaseous fuel consumption and emissions from solid fuel consumption is confirmed by this study. The analysis is important since after 2008 crisis many countries such as China and Turkey besides India started to borrow external debt heavily to create government investments to boost employment market which collapsed due to global economic crisis. This study carries importance since global greenhouse gas emissions may be financed through external debt in India.  Since sustainability is the main issue in current world and reduction of emissions is one of the highest priorities of humanity, necessary measures should be taken into account to reduce financing of emissions through external debt in India.Keywords: external debt, India, ARDL model, emissions, economic growthJEL Classifications: Q01, Q56, C01DOI: https://doi.org/10.32479/ijeep.11533