Green Banking, Renewable Energy Consumption, and Economic Growth: An In-depth Study in India

Abstract

Purpose: This study examines the impact of green banking, renewable energy consumption, and environmental factors on economic growth in India. It aims to understand how financial development and sustainability indicators jointly influence economic performance in a developing economy context.

Design/Methodology/Approach: The study is based on secondary data collected from the World Bank World Development Indicators database for the period 1990 to 2023. Green banking is proxied using DCPS to the private sector, while renewable energy consumption and carbon emissions represent environmental dimensions. The analysis employs descriptive statistics, correlation analysis, and Ordinary Least Squares (OLS) regression to examine relationships among the variables.

Findings: The results reveal that DCPS and renewable energy consumption have a positive and statistically significant impact on economic growth, indicating the importance of financial development and clean energy adoption. In contrast, carbon emissions negatively affect economic growth, suggesting that environmental degradation poses a challenge to sustainability. Trade openness also contributes positively, while inflation shows a negative influence on growth. The OLS model explains 71% of the variation in GDP growth (R² = 0.71). Overall, the findings confirm a strong relationship between green banking proxies, environmental factors, and economic performance.

Implications: The study provides empirical evidence supporting the integration of financial development with environmental sustainability. It contributes to the literature by using simple yet effective statistical techniques to analyze the green finance-growth nexus in India. Policymakers should promote green finance, expand renewable energy investments, and ensure environmental regulations to achieve sustainable economic growth.