Foreign Aid and Its Environmental Implication in India

Sahoo, Kalpana
Sethi , Narayan
JEL codes: 
F33 - International Monetary Arrangements and Institutions, O11 - Macroeconomic Analyses of Economic Development, Q5 - Environmental Economics.
The present study empirically investigates the impact of foreign aid on environmental quality in India with the presence of some linkage factors i.e. gross domestic product, trade liberalization, net forest depletion and total value added by the industrial sector. This study is based on the annual time series data covering the period from 1970-71 to 2010-11. By using the OLS technique, the study finds that impact of foreign aid on environment degradation is negative and statistically significant. However, aid helps in reduction of environment pollution in India. It concludes that deforestation, industrialization and economic growth are the major factors which responsible for environment degradation in India. This study suggests that, it is the responsibility of the government to make appropriate plans and programs to maintain a balance between growth challenges and environment challenges. Careful planning and systematic policies should be implemented to ensure that the green growth strategies do not result in a slow growth strategy.
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