Effect of Remittances on Renewable Energy Consumption in India: Evidence from a Nonlinear Analysis

Abstract

The flow of remittances is decisive in shaping India's economic and societal welfare. India is also one of the fastest-growing economies, and its energy demand has a determining impact on global energy consumption. Remittances are often seen as a crucial source of external finance for India and can play a decisive role in financing renewable energy generation projects. However, minimal exploration has been conducted on the issue of interrelationship between remittances and renewable energy consumption in India. The present study attempts to empirically test the impact of remittances on the level of consumption of renewable energy in India over the period 1990–2020, which, to the best of our knowledge, none of the previous studies has dealt with yet. The results of the nonlinear autoregressive distributed lag (NARDL) model show that a lagged negative shock of remittances positively and significantly impacts renewable energy consumption in India. The long-term result confirms that a negative shock of remittances significantly reduces renewable energy use. The reduction of remittances has a more significant impact than the increase of the same, implying the existence of an asymmetric impact of remittances over renewable energy consumption. One of the critical policy implications of these findings is that the government should promote policies that enhance the inflow of remittances as it would facilitate the use of renewable energy in India.