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The Next Economy
Circular Economy Framework Could Give India a Competitive Advantage

A new report has found that adopting circular economic principles would put India on a path to positive regenerative and value-creating development with annual benefits of US $624 billion in 2050 compared with the current development — equivalent to 30% of India’s current GDP.

Produced by the Ellen MacArthur Foundation and the United Nations Conference for Trade Development (UNCTAD) as Knowledge Partner, Circular Economy: Rethinking growth for long-term prosperity reveals that in addition to creating cost savings for businesses and households, following a circular economic development path would reduce negative externalities: greenhouse gas emissions be 44% lower in 2050 compared to the current scenario, and congestion and pollution would fall significantly, leading to health and economic benefits to Indian citizens.

“This report builds on the Foundation’s previous analysis of the circular economy opportunity for Europe, by exploring for the first time the potential of applying the circular framework in a fast-growing market context,” said Dame Ellen MacArthur. “With its existing circular mindset and strong digital backbone, India can reap significant economic and societal benefits, embarking on a positive development path as it focuses on regenerative practices.”

“Traditionally, the Indian economy has been one where reusing, re-purposing and recycling has been second nature. In a world that is increasingly running out of natural resources, this thinking is an asset that must be leveraged by businesses, policymakers and citizens in an organized manner and expanded to include other elements to make the economy truly circular,” added Shankar Venkateswaran, chief of Tata Sustainability Group.

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As a result of unprecedented economic dynamism and a rapidly expanding population, India — which is slated to become the fourth-largest economy in the world if current economic growth trends continue — faces significant questions about urbanization, resource scarcity and high levels of poverty, and will be required to make profound choices regarding the path to future development.

The emerging powerhouse market could embark upon an industrialization path comparable to that of mature markets — albeit faster — complete with all of the associated negative externalities it entails. But this scenario is not inevitable. With its young population and emerging manufacturing sector, the country is well positioned to make systematic choices that would put it on a trajectory towards positive, regenerative and value-creating development.

Business leaders and governments around the world are increasingly looking beyond the cradle-to-grave model of growth, with a view to operate a strategic move towards a more long-term, sustainable approach. Existing research by the Ellen MacArthur Foundation and others has demonstrated the [food and agriculture](/news_and_views/next_economy/hannah_furlong/report_future_plastics_can_should_be_circularundeniable benefits of a circular economy — one that is restorative and regenerative by design, and makes effective use of materials and energy in a digitally enabled model of development.

Achieving these benefits would require Indian businesses to lead the circular economy transformation — launching new circular economy initiatives and reinforcing existing efforts — with policymakers simultaneously setting the direction and creating the right enabling conditions. Universities, non-profits and international organizations could play important supporting roles, including facilitating and participating in local collaborative initiatives.

What’s more, by applying circular economy principles to new activities, India — as well as other high-growth markets — can achieve a competitive advantage over mature economies. Linear lock-in will require significant transformation on the part of mature economies in order to reach the same level of circularity.

For example, 70% of the buildings expected to stand in India by 2030 have not yet been built, compared to 25% in the UK. If both economies applied circular economy principles to all new construction until that year, India’s buildings would have higher embedded circularity. India could leverage this competitive advantage by developing circular construction skills and innovation to export to other countries. Additionally, the total costs of shifting to a highly circular system (relative to the size of the economy) would be much lower for India.

“Increasing circularity can help unlock efficiencies, opening up urgent investment opportunities and delivering environmental, economic and social gains,” said Guillermo Valles, director for the UNCTAD’s International Trade in Goods, Services and Commodities.

“Lessons from this work in India serve as an important example for other developing countries seeking to meet both the Sustainable Development Goals (SDGs) and commitments in the Paris Agreement.”


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