Impact of economic structure on the Environmental Kuznets Curve (EKC) hypothesis in India

• Published in: Journal of economic structures 2021-12, Vol.10 (1), p.1-17, Article 28
• Main Authors: Villanthenkodath, Muhammed Ashiq, Gupta, Mohini, Saini, Seema, Sahoo, Malayaranjan
• Format: Article
• Language: English
• Subjects: Business and Management; CO2; Economic structure; Economic theory; Economics; Economics and Finance; EKC; Energy consumption; Energy structure; Engineering; Environmental quality; Hypotheses; India; Statistics
• ISSN: 2193-2409; 2193-2409
• DOI: 10.1186/s40008-021-00259-z

This study aims to evaluate the impact of economic structure on the Environmental Kuznets Curve (EKC) in India. The present study deviates from the bulk of study in the literature with the incorporation of both aggregated and disaggregated measures of economic development on the environmental degradation function. For the empirical analysis, the study employed the Auto-Regressive Distributed Lag (ARDL) bounds testing approach of cointegration to analyse the long-run and short-run relationship during 1971-2014. Further, the direction of the causality is investigated through the Wald test approach. The results revealed that the conventional EKC hypothesis does not hold in India in both aggregated and disaggregated models since economic growth and its component have a U-shaped impact on the environmental quality in India. However, the effect of population on environmental quality is positive but not significant in the aggregated model. Whereas, in the disaggregated model, it is significantly affecting environmental quality. Hence, it is possible to infer that the population of the country increases, the demand for energy consumption increase tremendously, particularly consumption of fossil fuel like coal, oil, and natural gas, and is also evident from the energy structure coefficient from both models. This increase is due to the scarcity of renewable energy for meeting the needs of people. On the contrary, urbanization reduces environmental degradation, which may be due to improved living conditions in terms of efficient infrastructure and energy efficiency in the urban area leading to a negative relation between urbanization and environmental degradation.