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Financial Development and FDI as Determinants of Renewable Energy Consumption: Empirical Evidence from India

  • Namita Kapoor* Namita Kapoor Corresponding author Associate Professor Amity University, Noida, Uttar Pradesh, India India Namita Kapoor ORCID Id
Received: February 28, 2025
Accepted: March 26, 2025
Published: June 18, 2025
Volume: 1 (1) | Page: 1-12

Abstract

Foreign direct investment (FDI) plays a pivotal role in the economic development of emerging economies by promoting clean energy transitions, technology transfer, and energy efficiency. This study investigates the impact of FDI and financial development on renewable energy consumption in India using annual time-series data from 2000 to 2019. Employing Phillips-Perron unit root tests, Vector Autoregression (VAR), and Granger causality tests, the results reveal short-run causality running from both FDI and domestic credit (proxy for financial development) to renewable energy consumption. These findings highlight the significance of external capital flows and domestic credit availability in advancing India’s renewable energy agenda. The study offers policy relevant insights into the design of financial incentives and regulatory support mechanisms to strengthen clean energy uptake.

Keywords: foreign direct investment, financial development, renewable energy consumption, granger causality, India, VAR, Phillips-Perron test, time-series analysis

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