FDI, Economic Growth and Ecological Balance: Some linkages in the Indian Context

In the era of globalisation, FDI has been instrumental to economic growth by augmenting capital, employment and productivity in a capital-starved economy; while it also creates ecological complexities via lax environmental regulation and sector-specific performance. Although, this idea has been questioned by authorities like Simon Kuznet who believes a positive income elasticity of demand for the environment followed by an increase in income of the nation compels the government to invest in environmental protection. Against this backdrop, this paper studies the dynamics of co-integration between GDP, FDI and ecology in the context of India by utilising data from 1960 to 2015. Our findings confirm the existence of a causal relationship between FDI and ecological imbalance in the host country. And therefore, warns about the urgency of taking initiatives such as (a) proper coexistence of environmental and economic policies (b) incorporation of stringent rules and regulations (c) investment in clean energy to cater for the need of environmental sustainability in the host country