NITI Aayog’s Circular Economy Vision Needs Differentiation, Not Uniform Targets
For a comprehensive circular economy vision, real gains will depend on sector-specific policy design and outcome-oriented metrics
A background note can be accessed here: NITI’s Circular Economy of End-of-Life Vehicles
Deeksha Goel: Co-Founder and CEO, Sharstone Global
SDG 12: Responsible Consumption and Production | SDG 9: Industry, Innovation and Infrastructure
NITI Aayog | Ministry of Environment, Forest and Climate Change
The framework proposes cross-cutting tools such as extended producer responsibility and material standards, yet circularity gaps vary widely across sectors. How should India prioritise sector-specific interventions to maximise net circularity gains rather than pursue uniform, aspirational targets?
Global material consumption crossed 100 billion tonnes in 2019, with nearly 90 percent ending as waste. India’s resource extraction intensity, estimated to be over 250 percent higher than the global average, makes circularity an economic and strategic necessity rather than a purely environmental choice. Estimates indicate that material recycling could generate benefits of USD 218 billion by 2030 and over USD 600 billion by 2050, which is nearly 30 per cent of current GDP, while reducing greenhouse gas emissions by up to 44 percent.
However, uniform circularity targets risk administrative overreach and policy paralysis. To maximise net gains, India must prioritise sector-specific interventions based on material value, toxicity, and reuse potential. Differentiated extended producer responsibility (EPR) should be adopted early, with stringency calibrated to economic and environmental risk. Targeted market incentives, including GST rationalisation for scrapping and recycling, can address viability gaps and accelerate substitution of virgin materials. Green public procurement can create stable demand by mandating recycled-content thresholds in heavy industry, while material substitution roadmaps should promote bio-based alternatives where lifecycle assessments justify the shift.
Firms often face misaligned incentives due to weak secondary material markets and linear cost advantages. What incentive architectures are most effective in shifting business models toward circularity, and how can policy design minimise risks of rent capture or regulatory arbitrage?
Linear supply chains offer cost advantages that discourage firms from adopting circular practices, particularly in the absence of mature secondary material markets. Shifting business models toward circularity therefore requires an integrated incentive architecture rather than isolated policy levers. Effective adoption depends on reducing input costs, improving direct producer savings, and mitigating financial risk, while safeguarding against rent capture and regulatory arbitrage. Targeted tax incentives, such as a Green GST slab linked to the share of recycled content used in production, can encourage early adoption and scale effects.
Tradable circularity credits can further reinforce this shift, with the Green Credit Programme announced by the Ministry of Environment, Forest and Climate Change (MoEFCC) serving as a platform for credit pooling, transferability, and liquidity across sectors.
De-risking finance instruments are equally critical, including preferential lending with less stringent repayment structures for circular infrastructure such as scrapping facilities, e-waste refineries, and green start-ups.
To ensure integrity and minimise arbitrage, these incentives must be supported by a fully integrated digital ecosystem that replaces paper-based compliance with real-time tracking and performance verification.
Circular economy frameworks risk focusing on easily observable metrics that may not reflect true environmental impact. What impact metrics and data-governance systems should India embed to ensure policies drive genuine resource efficiency and avoid perverse incentives?
Circular economy frameworks risk distorting outcomes when they privilege easily observable recycling volumes over genuine environmental impact. India’s policy architecture should therefore embed metrics that capture material value retention, resource productivity, and lifecycle emissions. Impact assessment must prioritise quality over quantity, favouring closed-loop recycling that preserves material integrity, such as steel recycled into steel, rather than downcycling that erodes long-term value. Resource productivity metrics should track the economic value extracted per unit of recycled material, enabling meaningful decoupling of growth from resource consumption.
Equally important is the measurement of long-term greenhouse gas reductions, with mandatory mid- and long-term emissions reporting and carbon credit allocation based on verified reductions rather than aggregate recycling volumes. Robust data governance is essential to support these metrics. A decentralised National Circularity Data Exchange can automate tracking of material recovery, emissions reduction, and net environmental impact, while a digital repository of material compatibility can empower producers and recyclers to make informed decisions about blending recycled and virgin inputs without compromising performance or sustainability.
Author:
Views are personal.