CIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY 1 CIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY2 CIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITYCIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY 3 Executive summary In a context characterised by unprecedented economic dynamism and a rapidly growing population, India stands at the threshold of profound choices about the path to future development. If it continues, the countrys economic growth trend, which averaged 7.4% a year in the last decade, will lead it to become the fourth largest economy in the world in about two decades. 1 This positive prospect does not, however, come without challenges as the nation still faces signicant questions about rapid urbanisation, resource scarcity, and high levels of poverty. In an interconnected world predicated largely on a linear economic model, the upcoming Indian powerhouse could embark on an industrialisation path comparable albeit faster to that of mature markets, with the associated negative externalities it entails. But this scenario is not inevitable. With its young population and emerging manufacturing sector, the country is at a crossroads and can today make systemic 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 linear take, make, dispose model of growth, with a view to operate a strategic move towards an approach t for the long term. Past research by the Ellen MacArthur Foundation and others has demonstrated the potential of the circular economy one that is restorative and regenerative by design and makes e!ective use of materials and energy in a digitally-enabled model of development. This report shows that a circular economy path to development could bring India annual benets of 40 lakh crore (US$ 624 billion) in 2050 compared with the current development path a benet equivalent to 30% of Indias current GDP. This conclusion rests on high-level economic analysis of three focus areas key to the Indian economy and society: cities and construction, food and agriculture, and mobility and vehicle manufacturing. The research shows that realising these benets fully would require applying circular economy principles in combination with harnessing the unfolding digital and technological transformation, all tailored to the Indian context. In addition to creating direct economic benets for businesses and households, following a circular economy development path would reduce negative externalities. For example, greenhouse gas emissions would be 44% lower in 2050 compared to the current development path, and other externalities like congestion and pollution would fall signicantly, providing health and economic benets to Indian citizens. Achieving these benets would require Indian businesses to lead the way in the transition phase, with policymakers simultaneously setting the direction and creating the right enabling conditions. Other organisations, such as universities, non-prots, and international organisations can play important supporting roles, including facilitating and participating in local collaborative initiatives. By embarking on a circular economy transformation launching new circular economy initiatives and reinforcing existing e!orts India could leverage its expected high levels of growth and development to build a more resource- e!ective system, creating value for businesses, the environment, and the Indian population4 CIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY In support of the report “India has the opportunity to save money, make money and do good by adopting the principles of the circular economy. It has the opportunity to leapfrog other economies and establish a leadership position. This must read report provides a framework and practical recommendations for three vital sectors of the economy namely agriculture, construction and transportation.” MR RANGASWAMI, FOUNDER, CORPORATE ECO FORUM “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 organised manner and expanded to include other elements to make the economy truly circular. Many companies in the Tata group already implement some of the principles of a circular economy and we would continue to explore opportunities to expand this; it makes business sense and furthers our mission of improving the quality of lives of communities we serve globally.” SHANKAR VENKATESWARAN, CHIEF TATA SUSTAINABILITY GROUP “Increasing circularity is paramount to unlock e!ciencies in a world which needs urgent investment opportunities in sectors which deliver environmental, economic and social gains. Lessons from this work in India can serve as an important example for other developing countries seeking to implement policies to meet the SDGs and the commitments in the Paris Agreement.” AMBASSADOR GUILLERMO VALLES, DIRECTOR FOR INTERNATIONAL TRADE IN GOODS, SERVICES AND COMMODITIES, UNCTAD “This ground-breaking report shows how India can signicantly benet from a circular economy creating jobs and cutting pollution. Construction, mobility and agriculture in India can be re-purposed to oer more-for-less by designing out waste, digitising production and consumption and optimizing the use of economy wide assets. India can leapfrog the take-make-waste traditions of industrialized countries, and oer its consumers a new path to prosperity. This opportunity needs smart policy and business champions. With these ingredients India can rise to new heights.” DAN HAMZA-GOODACRE, CLIMATEWORKS “Beyond design practice and economic models, the circular economy will also aect the nature of collaboration well beyond existing practices. We need new procurement making commitments between all parties based on mutual gains. This will be a big disruption to existing practices from nance to contractual arrangements. It will upset our own sector, a big challenge but an opportunity to re-shape how we work.“ CAROL LEMMENS, DIRECTOR, GLOBAL MANAGEMENT CONSULTING BUSINESS LEADER, ARUP “India is committed to the goals set out in the SDGs. It ratied the Paris Agreement on 2 October 2016, coinciding with the birth anniversary of Mahatma Gandhi. India is earnestly working towards nding ways to improve the standard of living of its citizens, compatible with its resources. Increasing circularity in the Indian economy, by better utilisation of materials, energy and innovative ideas ranging from Indias traditional knowledge to latest technologies will be very important to realise Indias sustainability goals over the next decades. Sectors such as mobility, agriculture and construction will play a crucial role in the future growth of India. The suggestions contained in the report are, therefore, noteworthy and timely.” H.E. MR AJIT KUMAR, AMBASSADOR AND PERMANENT REPRESENTATIVE OF INDIA TO THE UNITED NATIONS OFFICE AND OTHER INTERNATIONAL ORGANIZATIONS IN GENEVACIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY 5 “The arguments for choosing more sustainable strategies for national development giving attention not just to their economic but also to their social and environmental outcomes apply to all countries, advanced or emerging, rich and poor. The ones, such as India, trying to catch up in the race to create better lives for their citizens, however, face resource constraints natural, physical, nancial and human that make those choices doubly di!cult, yet just as imperative. The concept of circular economy, a metaphor that neatly resonates with Mahatma Gandhis ardent lifelong quest for e!ciency in production, su!ciency in consumption and what he could well have called “conservancy” of resources and deciency in wastes, captures well the desirable characteristics of the future we will all have to live in and how to get there. It is only to be hoped that governments, businesses and civil society in India will come together and draw upon these traditional and yet highly modern values in creating a vibrant, prosperous and fullling future for the nation. The insights of this Report will probably be of considerable value to other economies as well.” ASHOK KHOSLA,CHAIRMAN, DEVELOPMENT ALTERNATIVES, CO-CHAIR, INTERNATIONAL RESOURCE PANEL (2007-2016) “In the 70s, when I grew up in India, we practiced circular economy principles without even knowing it: we wasted no resources and reused everything. With rapid modernisation of its economy, however, India is loosing touch with its frugal roots. This report convincingly shows how India can rekindle its frugal consciousness and implement circular value networks that would set new global benchmarks for e!ciency and sustainability.” NAVI RADJOU, COAUTHOR OF FRUGAL INNOVATION: HOW TO DO BETTER WITH LESS AND FELLOW, JUDGE BUSINESS SCHOOL, UNIVERSITY OF CAMBRIDGE “The worlds growing and the increasingly a#uent population has caused an overuse of resources, higher price levels and increasing market volatility. In this scenario I believe that the circular economy model could be a game changer. We at Mahindra group are conscious of this and are innovating to create production models that reduce our reliance on virgin raw materials through reduce, reuse, recycle and upcycle. We recognise that the future of a circular economy for a transitioning economy like India involves incorporating the informal sector in discussions and assigning them a recognisable place in the value chain. I am happy to see that circularity has already started to make inroads into our linear economy, with innovative products from waste being introduced in the markets. At Mahindra we also work closely with our supply chain as positive inuencers and are happy to be part of this story. Circular economy in India by the Ellen MacArthur Foundation is an attempt to understand the needs of these very markets and could serve as an eye opener to the possibilities for circular economy in our country.” ANIRBAN GHOSH, CHIEF SUSTAINABILITY OFFICER, MAHINDRA GROUP “Indias growing manufacturing ambition is going to bring global issues of excessive waste with it. Hence considering discarded materials/products as legitimate raw materials with circular economy approach is the only way forward.” SHUBHI SACHAN, PUN!H PROJECT INITIATOR AND LEAD, GODREJ it reects a systemic shift that creates a positive and self-reinforcing development cycle, generating business and economic opportunities and environmental and social benets. The notion of circularity has deep historical and philosophical origins. The idea of feedback, of cycles in real-world systems, is ancient and has echoes in various schools of philosophy. It enjoyed a revival in industrialised countries after World War II when the advent of computer-based studies of non-linear systems unambiguously revealed the complex, interrelated, and therefore unpredictable, nature of the world we live in more akin to a metabolism than a machine. The circular economy model arose from several major schools of thought that emerged in the 1970s and gained prominence in the 1990s. They include the functional service economy (performance economy) of Walter Stahel; the Cradle to Cradle design philosophy of William McDonough and Michael Braungart; biomimicry as articulated by Janine Benyus; the industrial ecology of Reid Lifset and Thomas Graedel; natural capitalism by Amory and Hunter Lovins and Paul Hawken; and the blue economy systems approach described by Gunter Pauli. Circular economy as a framework for long- term prosperity in India Recent initiatives by businesses, government bodies, and non-prots in India show alignment with the principles of a circular economy. These initiatives include vehicle-sharing schemes, investments in renewable energy, and programmes to train farmers to understand and adopt regenerative practices. Several aspects of a circular economy are deeply ingrained in the habits of Indias people for example, high utilisation and repair of vehicles and distributed recovery and recycling of materials post-use. Often handled informally, these activities provide the only source of livelihood for some of the poorest parts of the population. For example, 60% of discarded plastics are recycled in India, compared to 6% in the U.S., and 95% of this activity happens informally. But these practices tend to happen at the very end of the value chains and amount to scarcity management strategies, with little upstream e#ort to enable e#ective recovery. As a result, much of the value is lost, compared with a system designed for circularity and value creation in the rst place. Current practices also create signicant negative externalities, including health risks for the wastepickers andCIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY 21 FIGURE 3: OUTLINE OF A CIRCULAR ECONOMY 1 Hunting and shing 2 Can take both post-harvest and post-consumer waste as an input Source: Ellen MacArthur Foundation, SUN, and McKinsey Center for Business and Environment; Drawing from Braungart 15 waterborne diseases that a#ect 37.7 million people and cost 73 million working days every year; 16 and water contamination by sewage and agricultural runo#. Overall, 76 million people in India do not have access to safe water. 17 Assuming continued economic and population growth, demand for water is expected to outstrip supply by 2020, 18 a trend that climate change is likely to exacerbate. Soil degradation. The Indian economy relies heavily on agriculture. It provides 64% of total employment in rural areas 19 and contributes 17.4% of GDP. 20 Over half the land in India is arable. 21 Soil degradation is a signicant problem, with total annual costs estimated at more than 35,000 crore (US$ 5.4 billion). 22 It is estimated that 147 million hectares, or 55% of the land used for biomass production, is degraded. 23 While some degradation is natural, due for example to earthquakes and landslides, the major causes are human and include deforestation, over-grazing, and urban sprawl. 24 A decline in soil quality results in lower crop productivity, prompting farmers to make greater use of fertilisers, and in so doing reduce their prots. 25 Loss of biodiversity. India is a very biodiverse country. With over 45,000 species of plants and 81,000 species of animals, it is home toCIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY 23 7-8% of all recorded species. 26 This biodiversity underpins many ecosystem services that benet humans. But India also contains two of the worlds most threatened hot spots: the Eastern Himalayan region and the Western Ghats. 27 At least 10% of Indias wild ora and possibly more of its