Circular economy refers to use of waste of one industry by another industry in a regenerative mode.
Environment Minister Prakash Javadekar and German Environment, Nature Conservation, Building and Nuclear Safety, Barbara Hendricks today held a bilateral meeting and agreed on the same.
"In a bilateral meeting held here, both the countries have decided to set up two working groups - one on circular economy and the other on water management.
Hendricks told reporters later that another working group will be set up on urban development after she meets with Urban Development Minister M Venkaiah Naidu.
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She said that modern waste management means environmental protection, health protection, climate action, resource conservation and economic development.
She said that she was delighted with Prime Minister Narendra Modi's initative of "Swacch Bharat" and Germany was ready to share with India its experience in building a modern circular economy.
She said that through her ministry's international climate initiative, Germany has been cooperating with Indian partners in projects that show viable solutions to climate protection measures.
"As a fast developing economy, climate adaptation measures, along with mitigation, formed the defining factor in India's approach towards development," Javadekar said.
He emphasised the need to alter the energy mix in favour of renewable energy sources so that a balanced approach towards development and environment conservation could be evolved.