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Renewable energy and the macroeconomic space in India: A Bayesian VAR approach

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  • SenGupta, Swapnanil
  • Sachan, Anshita
  • Sharma, Gagan Deep

Abstract

India's rapid rise as a global renewable energy producer is occurring alongside a significant economic transformation. The present study explores the relationship between renewable energy production (REN) and key economic drivers, namely, Gross Domestic Product (GDP), foreign direct investment (FDI), trade openness, patents, oil production, and public-private participation in energy over the period from 1990 to 2021. Using a Bayesian Vector Autoregression (BVAR) framework, we uncover nonlinear and time-varying effects: patents stimulate renewable output but with diminishing returns, FDI consistently suppresses growth in renewables, GDP exhibits an inverted U-shaped relationship, and trade openness follows a U-shaped trajectory. Oil production initially supports but later crowds out renewable generation, while private investment shows delayed positive effects after an initial drag. Variance decomposition highlights a shift from self-driven dynamics in the short run toward macroeconomic and structural determinants in the long run, with GDP, FDI, and R&D increasingly explaining variation in REN over time. The findings posit that renewable energy in India is both a driver and a product of wider economic shifts, calling for policies that synchronise innovation, trade, finance, and energy governance to ensure a resilient low-carbon transition.

Suggested Citation

  • SenGupta, Swapnanil & Sachan, Anshita & Sharma, Gagan Deep, 2026. "Renewable energy and the macroeconomic space in India: A Bayesian VAR approach," Renewable Energy, Elsevier, vol. 261(C).
    • Handle: RePEc:eee:renene:v:261:y:2026:i:c:s0960148126001230
    DOI: 10.1016/j.renene.2026.125298
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    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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