Assessing the nexus between sustainable business practices and trade competitiveness in India: an ARDL bounds testing approach with structural breaks

This study examines the relationship between sustainable business practices and trade competitiveness in India over the period 1995–2024 using the Autoregressives Distributed Lag (ARDL) bounds testing approach to examine both long-run and short-run dynamics. In the empirical analysis, renewable energy consumption (REC) is used as a proxy for an important environmental dimension of sustainable business practices, while exports of goods and services as a percentage of GDP (EXGS) are used as a proxy for trade competitiveness, reflecting export performance and trade intensity. Structural breaks in 2004 and 2011, identified through the Bai–Perron test and incorporated into the ARDL model, account for major policy reforms and economic transitions associated with changes in India’s trade performance. The ARDL bounds test provides evidence of a long-run relationship among EXGS, REC, trade openness (TOP), and gross capital formation (GCF). The long-run results indicate that renewable energy consumption, trade openness, and gross capital formation are positively and statistically significantly associated with EXGS, used as a proxy for trade competitiveness, with renewable energy consumption showing the largest estimated positive relationship with export performance. The short-run estimates also reveal positive and statistically significant relationships between changes in the explanatory variables and EXGS, while the highly significant and negative error-correction term confirms the presence of an adjustment mechanism toward the long-run equilibrium. Overall, the findings indicate that renewable energy consumption, representing one environmental dimension of sustainable business practices, together with trade openness and productive investment, is positively associated with India’s export performance and trade competitiveness as proxied by EXGS. The results provide useful evidence for policies that support renewable energy adoption, productive investment, and international market integration in the pursuit of sustainable economic growth.