Impact of Manufacturing Value Added on Environmental Degradation: empirical evidence from India

Abstract

In recent years, the manufacturing sector in India has been witnessing a continuous growth in output production due to increase in investment in the sector and the government’s commitment to reduce reliance on imports and boost exports considering the country’s huge domestic market. However, this development is not environmentally friendly as increase in production entails increase in energy consumption, which result in an increased carbon emission that damage the environment. In view of the foregoing situation, this study is set out to investigate the impact of manufacturing value-added on environmental degradation in India over the 1965-2016 period. The study used autoregressive and distributed lag (ARDL) model to achieve its objective. Carbon dioxide emission was used to proxy environmental degradation in the model. In order to serve as control variables in the model, some selected relevant macroeconomic variables such as energy use, trade openness, and economic growth were employed. The estimated result showed that manufacturing value added has positive impact on environmental degradation in India. It infers that the increasing production in the manufacturing sector is degrading the environment through carbon emission. This suggests that an increase in manufacturing sector value added contributes to reducing the quality of environmental in India. Also, the environmental Kuznets curve (EKC) hypothesis was tested and found to be invalid and non-existent. Since the manufacturing sector consumes a lot of energy in its productive activities, the result does not come as a surprise. Thus, we suggest that policymakers in India should apply appropriate measures to improve the quality of the environment through adoption of new technology that will ensure energy efficiency and reduce carbon emission from the country’s manufacturing sector.