Do Foreign Investments Harm Or Heal? An Empirical Study Of FDI And CO₂ Emissions In India

Abstract

Foreign Direct Investment (FDI) has become a primary source of capital formation in various countries around the world. Its significance lies in the profound impact it has on theeconomies of host nations.“FDI not only plays a crucial role in the economic development of a country but also contributes to technological advancement and job creation. However, despite its positive contributions to economic growth, the increase in FDI inflows has sparked debates about their potential effects on environmental quality.Some researchers argue that countries experiencing industrialisation, economic development, and an inflow of foreign investments may also witness a rise in CO₂ emissions, which can be particularly harmful to emerging nations.”

This research tries to investigate how foreign direct investments affect the CO₂ Emissions in India over the period of 1991- 2023. The study was conducted using the Autoregressive Distributed Lag (ARDL) method, which has shown that foreign direct investments reduce Carbon emissions in India in the long run.