Global Warming in Interaction with Domestic and Foreign Investment: The Indian Case Study

Abstract

Human actions have a substantial impact on the global environment. The depletion of the ozone layer due to the use of chlorofluorocarbons and the threat of global warming due to the accumulation of "greenhouse gases," carbon dioxide and methane that is released in agriculture, energy production, and transportation are few prominent illustrations of damages to the environment. The advent of these unprecedented repercussions of human activities on a global scale eventually directs to a complex economic policy in the world. Hence, the policies to promote economic growth, equity, trade, and technological change to have a significant impact on the global environmental scenario. Purpose: In this respect, the current study concentrates on the financial activities by a country, specifically, India, in relation to the global warming. The major financial activities in a country are based on domestic as well as foreign investment. The source of the domestic financial investment activities, known as Domestic Investment (DI), considered here are investment in plant, machinery, and equipment purchase. While the source of foreign investment is specified as Foreign Direct Investment (FDI). Methodology: The study applies Auto Regressive Distributed Lag (ARDL) model to find the co-integration between the three variables. Further, the long run impact of domestic investment and short run impact of FDI on carbon dioxide emission are found to be present. Finding: The study finds significant environmental impact of domestic and foreign investment in India. Implication: Further, the study provides important policy implication by suggesting reducing the usage of carbon emission through fossil fuel to improve long run sustainable development in India.