Greening the Indian Economy: The Dynamic Nexus Between Green Finance,Technological Innovation and Environmental Sustainability

Abstract

India, as one of the fastest-growing economies, faces the dual challenge of sustaining economic growth while addressing the environmental sustainability transition. Green financing and green technological innovation are key enablers in this transition, offering financial and technological solutions to mitigate climate change and promote sustainable development. However, despite growing global and national efforts, the interrelationship between green financing, technological innovation and environmental sustainability in India remains underexplored. This study aims to examine the impact of green financing and green technological innovation on environmental sustainability in India’s developing economy. This study employed the Autoregressive Distributed Lag (ARDL) model to analyze the long- and short-run dynamics, while Granger causality analysis determines the causal direction between variables. The findings reveal a significant long-term relationship between green financing and environmental sustainability in India. Findings, which are in support of the Environmental Kuznets Curve (EKC), show that as economies develop and give priority to cleaner technology, environmental degradation, such as carbon emissions, first increases with economic growth, peaks and then gradually declines. Analyzing the causal relationship between the factors in the study aids in the decision-making process for investors, governments and policymakers about green investments.