Environmental Sustainability in India: The Crucial Role of Government Expenditure and Trade

Abstract

This research undertakes a comprehensive examination of the impact of government expenditure and trade on environmental sustainability in India from 1995 to 2022. ARDL bounds test reveals a robust, long-term correlation between environmental sustainability, government expenditure, and trade volumes, marked by adverse and statistically significant effects. An Impulse Response Function (IRF) analysis reveals that a government expenditure shock leads to delayed increases in CO2 emissions, while trade consistently raises emissions. Inflation has both short and long-term impacts, with monetary policy adjustments mitigating its effects. Therefore, enacting effective taxation policies and rigorously enforcing environmental laws are critical mechanisms for enhancing environmental sustainability