Year: 2026 | Month: June | Volume 71 | Issue 2
Green Financing, Development Aid and Economic Growth: An Empirical Investigation of India’s Experience
Sonam Rastogi
DOI:10.46852/0424-2513.2.2026.9
Abstract:
The growing interest in sustainable development has enhanced the necessity to determine the role played by green financial flows and development assistance in facilitating economic growth. The research paper analyses how green finance and official development assistance affect economic growth in India over the period 2002-2022. The analysis uses important macroeconomic variables, such as net official development assistance (NET_ODA), environment-related aid (ENV_ODA), foreign direct investment (FDI), renewable energy investment (REI), domestic credit (DC), and trade openness (TRADE). The study uses Autoregressive Distributed Lag (ARDL) bounds testing method to capture both short-run and long-run dynamics. The findings establish a long-run cointegration relationship between the variables. Empirical evidence shows that total development assistance plays a significant role in economic growth whereas environmentally oriented aid plays a positive role in sustainable development in the long run. Investments in renewable energy also exhibit long term growth benefits despite short run adjustment costs. The impact of FDI and domestic credit on economic performance is however mixed in the study period. The results indicate that the strategic distribution of development aid to environmentally friendly sectors and the reinforcement of green financial institutions can improve the economic stability and help India to move to the low-carbon economy. The research has some policy implications in enhancing the performance of external financial flows towards the realization of sustainable economic development.
Highlights
- Green financial flows significantly influence India’s economic growth dynamics.
- Environment-focused development aid assists long-term sustainable economic development.
- ARDL analysis testifies to the existence of a stable long-run relationship between green finance and development aid with the macroeconomic variables.
- REI result in sustainable growth in spite of short-run adjustment costs.
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