[RSTV Archive] Circular Economy: Concept & Challenges

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With a growing population, rapid urbanization, climate change and environmental pollution, India must move towards a circular economy. An economic approach aimed at eliminating waste and the continual use of resources, the circular economy offers a new paradigm that emphasizes the need to take a comprehensive view of products and processes.

In this article, we shall understand the concept of a Circular economy over a linear one and also look at challenges that lie ahead.

Circular Economy: The Concept

  • A circular economy (also referred to as “circularity”)is an economic system that tackles global challenges like climate change, biodiversity loss, waste, and pollution.
  • Most linear economy businesses take a natural resource and turn it into a product which is ultimately destined to become waste because of the way it has been designed and made.
  • This process is often summarized by “take, make, waste”.
  • By contrast, a circular economy includes 3 R’s (Reduce, Reuse and Recycle), Refurbishment, Recover, and Repairing of materials.
  • Hence, Circular Economy focuses on increasing productivity in terms of more efficient utilization of resources.

Principles of Circular Economy

The concept is based on three main principles:

#1 Minimization of waste and pollution

The concept suggests the minimization of waste and pollution by reducing damages from economic activities.

#2 Extension of the useful life of products and materials

A circular economy aims to extend the useful life of the products and materials by creating the loops of the materials and products circulating in the economy. The goal is achieved through the active reuse, repair, and remanufacturing of the products and materials utilized in the economy.

#3 Regeneration of natural systems

The regeneration of natural systems is one of the fundamental concepts of a (circular) economy. It enhances natural capital and creates the necessary conditions for the regeneration of natural systems.

Why is the global attention towards this?

  • Raw material supply: Circular Economy fulfills the need for raw materials required by industries, especially the manufacturing industries.
  • Input costs are minimized: The output produced by industries in a circular economy comes back to the industries in the form of input.
  • QCDF improvement: Ultimately, QCDF (Quality, Cost, Delivery, and Flexibility) and sustainability level of industries get improved.

Applications of Circularity

(A) Construction sector

(B) Food and Agriculture

(C) Transportation and Mobility

Benefits offered by Circular Economy

For Economy

  • Economic growth, as defined by GDP, would be achieved mainly through a combination of increased revenues from emerging circular activities.
  • It lowers the cost of production through the more productive utilization of inputs.  
  • These changes in input and output of economic production activities affect economy-wide supply, demand, and prices.
  • Its effects ripple through all sectors of the economy adding to overall economic growth.

For Environment

  • It solves the problem of disposal of waste by converting waste into raw materials.
  • Besides the problem of solid waste management, the circular economy also solves the problem of air pollution, water pollution, and land pollution.

For Individuals

  • Lower cost for products and services
  • Greater utility and choice
  • Reduced negative externalities, e.g. congestion, pollution
  • Increased Efficiency of the products

Limitations to the circular economy models

There is some criticism of the idea of the circular economy.

  • Linearity: Recovery and recycling of materials that have been dispersed through pollution, waste and end-of-life product disposal require energy and resources, which increase in a nonlinear manner as the percentage of recycled material rises
  • Waste management: Impossibility for waste producers to dissociate themselves from their waste and emphasizes the contingent, multiple, and transient value of waste.
  • Unavoidability: A key tenet of this principle is to consider waste as avoidable and worthy of interest.
  • Utopian concept:  Circular Economy analogy of a circle evokes endless perfection; the analogy of scats evokes disorienting messiness.
  • Capability: Proponents of the circular economy have tended to look at the world purely as an engineering system and have overlooked the economic part of the circular economy.
  • Invisible economy: Invisible hand of market forces will conspire to create full displacement of virgin material of the same kind.

Need of the hour

  • India has a huge potential for reuse and recycling as less than 10-15% of the total waste generated goes into the recycling process.
  • Circular Economy will boost the reuse and recycling of materials.
  • To start with, sectors like construction, agriculture and vehicle and mobility can be considered as they are going to get the largest growth in coming years and thus India will be able to save more than Rs. 40 lakh Crore by 2030.

India’s roadmap

  • Digital India’: This mission contains a significant component of the recycling of electronic wastes. Swachh Bharat Mission is also about making wealth out of wastes.
  • Vehicle Scrappage Policy: This most recent reflects the perfect application of circular economy in Automobile sector.

Way forward

  • Build circular economy knowledge and capacity: Taking maximum advantage of circular models requires decision-makers throughout the organisation to understand the benefits and take them into account in business decisions.
  • Innovate to create new products and business models and demonstrate their success: Businesses can foster innovation to address challenges, such as transition costs, more rapidly by collaborating with research institutions and by making information open source.
  • Collaborate with other businesses, policymakers, and the informal economy: Participation in pre-competitive collaboration in cross-industry and cross-value-chain networks can enable businesses to drive change that they cannot create on their own.
  • Invest in circular economy opportunities: While sizing and prioritizing the value of investment related to the circular economy opportunities outlined in this report requires detailed analysis, the circular economy offers attractive opportunities for both businesses and financial institutions.


  • Resources in the world are finite. The circular economy will help the inefficient utilization of resources.
  • Political will is the key for implementation of Circular Economy.
  • Countries including India need to think about what they are taking from the environment and what they are contributing to it.
  • They also need to ensure that the material gets recycled or reused before it turns into waste.

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