Table of Contents

ABSTRACT

Background: Rapid economic growth in India has not only resulted in societal division through the extension of income inequality, but concurrently, it has caused environmental degradation. Hence, despite being counted among the fastest-growing economies, India often faces the joint challenge of curbing inequality in income and simultaneously accomplishing its commitment towards environmental sustainability.

Objective: Consequently, there is need for more in-depth analysis of the relationship between income inequality and environmental sustainability for India. Using the Gini coefficient as a measure of income inequality, the present study empirically analyses the impact of the widening gap of income inequality over natural resources depletion in India and any causal relationship between the two over the period 1970-2020 using data from the World Bank and the Standardized World Income Inequality Database.

Methodology: The paper has deployed Zivot-Andrews, Ng-Perron, and DF-GLS unit root tests along with Fully Modified OLS (FMOLS), and Dynamic OLS (DOLS) for long-run estimates. Canonical Cointegrating Regression (CCR) method has been applied for robustness checking. The study has also applied Granger causality and Toda-Yamamoto causality test to identify the direction of causality among the variables.

Key Findings: Findings justify that income inequality has significantly contributed to the depletion of natural resources in India. The results are confirmed to be robust, as reported by the CCR method. The Toda-Yamamoto causality test have found a significant unidirectional causal relationship from income inequality towards natural resources depletion.

Policy Implications: These findings suggest that the policymakers should focus on the redistribution of income in favour of the poorer section of the society in such a way that it increases environmental sustainability. Results of the study recommends for a more equitable distribution of income to lower natural resources depletion in India.

Keywords: India, Income inequality, natural resources depletion, environmental sustainability, FMOLS, DOLS