Dodgy metals trader here
1) India's cars don't contain rare earths. Cars that do are those with catalytic convertors and or rare earth magnets in the stereo etc. Which isn't the sort of car they're talking about scrapping.
2) That's not what he said either. Rather, that India can now recycle rare earths and it's also going to have a car scrappage scheme. Two different things, not the one being part of the other.
3) India does have a rare earths industry, a small one. They have the mixed concentrate (from varied mineral sands operations) and a small separation plant.
4) The biggie. You can't have a circular economy when you're building a civilisation the first time around. Because you're not scrapping enough to provide the scrap to build the civilisation. Sure, you should feed old cars into steel furnaces. But you want steel for 1 million (to invent a number) out and you've only got 100,000 cars a year to put in (to invent another number). You've still got to go get the steel for another 900,000 cars a year from somewhere.
This is also true of rebar for concrete buildings, steel and aluminium for windmills, anything in fact. It's only when you're tearing down civilisation 1.0 (or 2.0) that you've an excess of scrap over demand for new rather than a deficit. So, Civ 1.0 requires more raw material than local scrappage can produce. At which point, why not import scrap from people doing the Civ 3.0 bit instead of using iron ore to make virgin? As, umm, India does right now.
The advanced and rich countries are, largely enough, exporters of scrap metal. The currently poor countries are, largely enough, importers of the same stuff. Which is as it should be. Because a poor place doesn't have enough old stuff being scrapped to produce the Civ 1.0 while tearing down Civ 2.0 to create Civ 3.0 produces an excess of it.
5) Finally. Anyone worried about running out of rare earths is insane. There's a shortage of separation plants, that's true enough. But then you need one of those to process scrap anyway. There's absolutely no shortage of rare earth concentrates out there at all. It's dollar a kilo stuff (as opposed to seaprated, wihch might be $40 a kg stuff) wihch isn't the priec of something in any form of absolute short supply.