Green Finance, Digital Economic Infrastructure and India’s Renewable Energy Transition: Evidence from Multivariate Quantile-On-Quantile and KRLS approaches

Abstract

India’s transition toward renewable energy is critical for achieving its net-zero emissions target by 2070 and ensuring sustainable economic growth. This study investigates the dynamic, nonlinear and complementary effects of green finance and digital economic infrastructure on India’s renewable energy transition over the period 2005-2026. Composite indices are constructed using Principal Component Analysis to capture distributional heterogeneity and nonlinear interdependencies. The study employs a multivariate quantile-on-quantile regression approach, complemented by Kernel Regularized Least Squares and Granger causality analysis for robustness. The findings reveal pronounced nonlinear and stage-dependent relationships. Green finance exhibits weak and negative effects at lower quantiles but becomes significantly positive at higher quantiles, indicating that financial depth and sustained investment are essential for accelerating renewable energy adoption. Digital economic infrastructure demonstrates adverse effect initially, due to increased energy demand associated with digital expansion and contributes positively at medium-to-high quantiles by enhancing efficiency, smart grid integration and energy management. The multivariate results highlight strong complementarity between green finance and digital infrastructure with the improvements in renewable energy transition which occurs when both systems are well developed. Kernel-based estimates indicate that 1% increase in green finance and digital infrastructure, improves renewable energy transition by 0.132% and 0.521% respectively. Granger causality results confirm unidirectional causality from green finance to renewable energy transition and bidirectional causality between digital infrastructure and renewable energy transition. The study underscores the importance of integrated financial and digital policy frameworks to accelerate India’s clean energy transition and provides actionable insights for policymakers, regulators and financial institutions.