Macroeconomic Dynamics of Environmental Degradation in India: Evidence and Limits of Structural Transition Toward Sustainability

ABSTRACT: Understanding the macroeconomic determinants of environmental degradation is critical for designing effective and evidence-based sustainability policies in emerging economies. This study provides a comprehensive empirical re-examination of the growth–energy–environment nexus in India over the period 1990–2023 within an extended macroeconomic framework. It integrates key structural drivers—economic growth, energy consumption, industrialization, trade openness, urbanization, and renewable energy—into a unified analytical model to capture the complex interactions between development processes and environmental outcomes. Methodologically, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach within an error-correction framework, allowing for the estimation of both long-run equilibrium relationships and short-run dynamic adjustments under mixed orders of integration. The robustness of long-run estimates is further assessed using alternative cointegration techniques, while diagnostic and stability tests ensure the reliability of the empirical specification. The results confirm the presence of a stable long-run cointegrating relationship among the variables. However, the estimated long-run elasticities are heterogeneous and generally weak in statistical strength. Economic growth and energy consumption exhibit positive but modest associations with environmental degradation, indicating the persistence of scale effects and structural dependence on fossil fuel–based energy systems. In contrast, the effects of trade openness and industrialization are not statistically robust, suggesting that structural transformation and globalization have not yet translated into consistent environmental efficiency gains. Renewable energy does not demonstrate a significant long-run mitigating effect, reflecting its limited penetration and integration within the broader energy system. Short-run dynamics reveal asymmetric adjustment patterns. Energy consumption shows a negative and significant short-run effect, implying transitional efficiency gains, whereas industrialization contributes positively to environmental pressure in the short term. Urbanization exhibits divergent temporal effects, with short-run improvements but long-run environmental costs. The significant error-correction term indicates gradual convergence toward equilibrium. Overall, the findings highlight a nuanced and evolving relationship between macroeconomic processes and environmental degradation in India, underscoring the need for structurally aligned and context-specific policy interventions.