Exploring the asymmetric effect of fiscal policy instruments in encountering environmental degradation: proposing an SDG framework for India.

ABSTRACT

Asian countries are facing difficulties in attaining sustainable development goals (SDGs), and India is not an exception to it, with environmental degradation being one of the primary issues. Therefore, a policy-level reorientation may be required to address it. From this standpoint, fiscal policy instruments may come in handy towards fully integrating the SDGs into its agenda. The present investigation designs an SDG framework for India that could serve as an example for other Asian nations. This study introduces a new investigation exploring the relationship between fiscal policy instruments and environmental quality in India by examining the environmental Kuznets curve (EKC) hypothesis from 1990 to 2021. A nonlinear autoregressive distributed lag (NARDL) model is applied for empirical examination. The findings indicate that positive and negative shocks in fiscal policy instruments have significant impact on carbon emissions in both the long and short run. The study has also found evidence of an "inverted U-shape" EKC for India. These results are valuable from a policy perspective for India and other Asian countries to address environmental issues. The study has also outlined potential outcomes that may benefit India's fiscal policy in resolving environmental issues and attaining better economic growth. In the end, the study proposes a policy framework that supports SDG 7, SDG 8, SDG 12, SDG 13, and SDG 17 objectives.