Environment–Development–Trade Nexus in India: A Simultaneous System GMM Approach

Abstract

This study addresses the critical research gap in understanding India’s atypical structural transformation, where a service-led transition has bypassed traditional manufacturing-heavy phases, complicating the environment–development–trade nexus. Utilising a simultaneous system Generalised Method of Moments (GMM) technique, the research mitigates endogeneity issues to provide robust empirical insights. Key findings reveal that economic development significantly fosters human development but simultaneously intensifies CO 2 emissions. Crucially, the study rejects the Environmental Kuznets Curve hypothesis, identifying a monotonic rise in emissions driven by fossil-fuel-dependent transport and residential energy sectors rather than industrialisation. Furthermore, a counter-intuitive inverse relationship exists between growth and trade, suggesting a structural decoupling where domestic demand outpaces export-led gains. Trade also negatively impacts human development and environmental quality, reflecting the displacement of local labour and the carbon-intensive nature of energy-heavy export sectors. Policy contributions emphasise an integrated green transition through the National Action Plan on Climate Change, the implementation of formal carbon pricing (carbon tax/emission trading system) and targeted green research and development subsidies. These measures are essential to decouple growth from ecological erosion and ensure socially responsive, sustainable trade frameworks. JEL: C3 O44 Q5 F18 J24 Y1