Sustainable Finance And Its Economic Impact: Evidence From India Green Bond Market

Abstract

This study investigates the relationship between green bonds and economic growth in India using econometric methods over the period 2000-2023. Green bonds, as a sustainable finance instrument, have gained prominence for their role in fostering environmentally sustainable projects while influencing macroeconomic outcomes. Employing time-series data, the study examines the causality and long-term relationship between green bond issuance and economic growth indicators such as GDP, gross fixed capital formation (GFCF), and foreign direct investment (FDI). The analysis incorporates unit root tests, cointegration techniques, and Granger causality tests to assess the dynamic interactions between these variables. Results suggest that while green bonds contribute to capital mobilization, their direct impact on economic growth is relatively limited in the short term. However, the findings highlight their potential as a policy instrument to foster sustainable economic development in India. This study underscores the importance of integrating green finance into national economic strategies to achieve long-term sustainability goals.