Circular Economy: Meaning, Benefits and Opportunities – Explained, pointwise

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Technology has fundamentally altered the ways of working and living in the modern civilisation. The economic growth models are extremely resource intensive. The ecological footprint has risen sharply in the last few decades. The pace of consumption of resources has exceeded the earth’s bio-capacity to regenerate the resources. Environmentalists are calling for a fundamental readjustment in the production and consumption models. In this context, Circular Economy can ensure a sustainable utilization of resources. Adoption of Circular Economy is even more crucial for India. With a very high population base, and a significant proportion of population with low living standard, sustainable growth is imperative based on optimal resource utlization. With a growing population, rapid urbanization, climate change and environmental pollution, India must move towards a circular economy.

What is the meaning of Circular Economy?

The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended. This is a departure from the traditional, linear economic model, which is based on a take-make-consume-waste pattern. This model relies on large quantities of cheap, easily accessible materials and energy.

Circular Economy UPSC

Source: European Parliament

Circular Economy is based on three principles, driven by design: (a) Eliminate waste and pollution; (b) Circulate products and materials (at their highest value); (c) Regenerate nature.

In a circular economy, waste is minimized. Products and raw materials are designed to be reused as long and intensive as possible over and over again. Waste is the new raw material.

Circular Economy is not just about recycling waste materials. Recycling begins at the end of the product’s lifecycle, when it is thrown away. The circular economy goes right back to the beginning to prevent waste and pollution from being created in the first place. It is based on the premises that the environmental challenges have already reached a stage where even recycling alone won’t be enough to address them. Hence, Circular Economy is distinct from Recycling Economy model. One example of Circular Economy is the use of microbial biodegradable polymers produced from agro-food waste residues for packaging of food items. This will eliminate use of plastics and the need of recycling. Waste generation is minimal in Circular Economy.

Linear Recycling and Circular Economy UPSC

Source: World Economic Forum

According to the Circularity Gap Report 2020, the global economy is only 8.6% circular. This means that over 90% of the resources that enter the economy (100 billion tonnes per year) are wasted.

What are the benefits of Circular Economy?

Protection of the environment: Circular economy benefits the environment by consuming fewer natural resources, and thus reduces ecological footprint. It helps lower the emissions and produces less polluting waste. It helps in preservation of biodiversity, as there is less pressure on natural resources like forests.

Benefits for the local economy: There is emphasis on promoting production models that rely on reuse of nearby waste as raw material.

Drives employment growth: Circular Economy fosters the development of a new, more inventive, and competitive industrial model, resulting in higher economic growth and more employment opportunities.

Promotes resource independence: Reusing local resources can reduce reliance on imported raw materials. It can help in achieving self-sufficiency.

What are the needs and opportunities for Circular Economy in India?

Pressure of Population: India will be most populous nation soon. According to a World Bank Report, there are more than 190 million people in India living on less than US$ 2.15 per day (poverty line). Lifting them out of poverty will put a massive strain on natural resources.

Limited Resources: India’s resource base is limited with only 2% of world’s landmass and 4% of freshwater resources, while accounting for ~18% world’s population. Linear Economy model will constrain India’s manufacturing.

Environmental Concerns: According to the Global Footprint Network, India’s Ecological Footprint has been rising consistently. Consequently India’s Biocapacity deficit has increased from -0.1 gha in 1961 to -0.8 gha in 2018. Moreover, as resource intensity of India’s economy increases, the emissions are also rising.

India's Ecological Footprint UPSC

Source: Global Footprint Network

A circular economy development path could significantly mitigate negative environmental externalities. For example, greenhouse gas (GHG) emissions could be 23% lower in 2030 and 44% lower in 2050 compared with the current development scenario.

Environmental Benefits of Circular Economy for India UPSC

Source: Ellen MacAurthur Foundation, Circular Economy in India: Rethinking Growth for Long-term Prosperity

Resource Dependence: Finite supplies also means India is dependent on other countries for raw materials. Resource dependence increases imports and raises current account deficit. It also puts a strain on Government finances.

Economic Benefits: According to EM Foundation, a circular economy development path in India could create annual value of ₹14 lakh crore (US$ 218 billion) in 2030 and ₹40 lakh crore (US$ 624 billion) in 2050 compared with the current development scenario. By adopting circular economy approaches, businesses could achieve material cost savings and increase their profits.

Technology Hub: Leveraging digital technology to enable the circular economy could reinforce India’s position as a hub for technology and innovation.


Sectors such as food, agriculture, fashion, construction, mobility, and rare earth materials are expected to provide the biggest opportunities for circular economy in India.

Construction: India is urbanising at an unprecedented rate, against a backdrop of resource constraints. An estimated 700-900 million square metres of new commercial and residential space a year needs to be built to cope with the increasing demand. Circular Economy Principles can be incorporated into design of the infrastructure (like buildings, water, sanitation, waste treatment infrastructure) to create more effective material cycles. More systemic planning of city spaces, integrated with circular mobility solutions, can contribute to higher air quality, lower congestion, and reduced urban sprawl.

Food and Agriculture: (a) Combining local knowledge and traditional methods (like working with a large variety of species) with modern technology (like precision farming, and digitally enabled asset- and knowledge-sharing systems) could increase yield while significantly decreasing requirements for resources such as water, synthetic fertilisers, and pesticides; (b) Reducing food waste across the supply chain could make the Indian food system even more effective. This would require optimising production and digitising food supply chains to match supply and demand more easily; (c) Urban and peri-urban farming can bring food production closer to consumption, reducing food waste and transportation requirements.

Mobility: Demand for personal mobility in India is expected to double or even triple by 2030. Circular economy principles can contribute to a mobility system that would meet the growing needs of the Indian population, especially in cities, while limiting negative externalities, such as GHG emissions, congestion, and pollution. (a) An on-demand mobility system, embracing vehicle-sharing trends (like bike, car sharing) and leveraging digital innovation (App similar to cab-hailing Apps that can link users for car sharing), could provide efficient and effective transportation with high vehicle usage and occupancy rates; (b) Vehicle as a service model can provide convenient last-mile connectivity and can create convenient door-to-door journeys; (c) Taking reparability, remanufacturing, and recycling into account in vehicle design can reduce the need for materials and energy. Building vehicles that rely on zero-emission propulsion technology could reduce negative externalities.

What steps have been taken by the Government to promote Circular Economy?

The Government of India has been actively formulating policies and promoting projects to drive the country towards a circular economy.

First, The Government has notified various rules, such as the Plastic Waste Management Rules, e-Waste Management Rules, Construction and Demolition Waste Management Rules, Metals Recycling Policy, etc. The Rules are geared towards reducing waste generation and maximizing recycling of waste.

Second, NITI Aayog has undertaken several initiatives to address the challenges in the utilization of waste as resource and to evolve a perspective on the recycling industry in India. Progress has been made in promoting the usage of fly ash and slag produced in the steel industry in other sectors.

Third, NITI Aayog has organized international conference on ‘Sustainable Growth through National Recycling’ and has prepared strategy papers for resources efficiency in sectors like Steel, Aluminium, Construction and Demolition and e-waste.

Fourth, To expedite the transition of the country from a linear to a circular economy, 11 committees have been formed for 11 focus areas. The committees will prepare comprehensive action plans for transitioning from a linear to a circular economy and monitor their effective implementation.

Line Ministries for Transition to Circular Economy

What can be the approach going ahead?

First, The Government can incentivize India’s production systems to adopt practices around the principles of circular economy so that they not only reduce resource dependency but also gain competitiveness. This requires a close collaboration between the Government and industry.

Second, Businesses can integrate circular economy principles into their strategy and processes. They can train current and prospective employees on circular product design and new business models. They can also collaborate with other businesses, policymakers, and the informal economy to drive the change.

Third, Circular and local models have proven to be more resilient and efficient in addressing the needs of the masses. The Government should encourage local alternatives to enable local supply chains.

Fourth, so far the focus of Government’s effort has been more on recycling. Now the focus should shift up the value chain to include principles of circular economy in the design and manufacturing stages. The effort should be geared towards creating enabling regulatory frameworks and removing policy barriers.

Fifth, The Government can also support circular models through public procurement and infrastructure. This could help kick-start those models to stimulate their wider adoption in the market.

Sixth, Circular economy principles should be embedded into education. Bringing circular economy principles into education, from school through to professional development, can equip learners with the right systems thinking skills and mindsets to become active shapers of a circular economy.


As India embarks on its path to become a developed economy, adopting a Circular Economy model will ensure that this growth is sustainable with minimal impact on environment.

Syllabus: GS III, Conservation, Environment Pollution and Degradation.

Source: Economic Times, Mint, PIB, EM Foundation

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