To explore the possible environmental and economic influences of FDI and Trade openness in Pakistan and India is the aim of this study. Especially this study investigates whether trade liberalization harm the environment of Pakistan and India or not. We conducted panel ARDL model for both countries as a group. We found that FDI and CO2 has positive relation with each other in empirical section which shows FDI of both countries could harm their environment. In long run trade has negative

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... ion with environment but in short run it has positive correlation. This study concludes that FDI and trade liberalization can boost the economy by crating job opportunities but they harm the environment in Pakistan and India.