To reduce strategic vulnerabilities and rise as a global industrial hub, India must shift from state-led resource control to market-driven resilience in rare earths and critical minerals
The Geopolitical Shock That Changed the Game
In 2025, China’s restriction on twelve rare earth elements (REs) reawakened global fears about over-dependence on a single nation for critical mineral supply chains. These materials—vital for semiconductors, EVs, defence tech, and renewables—became the focus of new economic and strategic calculus.
While China later adjusted its position, the message was clear: supply chain dominance can be weaponised, and reliance on it is a long-term liability.
What Are Rare Earths, and Why Do They Matter?
Rare earth elements (REs) refer to seventeen metals—fifteen lanthanides, plus yttrium and scandium. They are not rare in quantity, but are rare in extractability. Dispersed across complex ores, their separation is chemically intensive, capital-heavy, and environmentally taxing.
A few grams of neodymium or dysprosium can vastly improve the performance of magnets in wind turbines, EVs, or missile systems. Despite annual production of just 400,000 tonnes, REs are embedded in everything from Nvidia’s AI chips to F-35 fighter jets.
China’s Rare Earth Dominance: Built, Not Found
Though China owns around half of global rare earth reserves, its true edge lies in a state-built industrial ecosystem:
- 60% of mining and over 90% of processing capacity
- Long-term investments in refining tech, university R&D, and downstream integration
- An acceptance of environmental risks that deterred other nations
This wasn’t just economic planning—it was strategic industrial design, where rare earths became a geopolitical lever.
Beijing’s Strategy Faces Pushback
Ironically, China’s export curbs have sparked global countermeasures:
- The US DoD invested in MP Materials, reviving American RE capacity
- Lynas (Australia) set up processing units in Texas
- Tesla and Toyota are now designing products to reduce or eliminate RE dependence
This demonstrates a key truth: coercive dominance triggers long-term diversification. Every move to control supply chains leads others to find ways around them.
India’s Untapped Potential—and Current Gaps
India ranks sixth globally in rare earth reserves, with an estimated 1.6 million tonnes. Recent progress includes:
- A permanent magnet plant by Indian Rare Earths Ltd (IREL) in Visakhapatnam
- The launch of the National Critical Mineral Mission (NCMM), identifying 30 strategic minerals
Yet, India still imports over 70% of key industrial inputs in pharma, electronics, batteries, and semiconductors. This leaves the economy exposed to external shocks—not only from China but from general global volatility.
Why the Old PSU-Led Model Won’t Suffice
India’s historical approach—led by public sector undertakings (PSUs)—built foundational capacity but now shows its limits. The next phase requires agility, innovation, and risk capital—areas where the private sector excels.
A state-only approach cannot deliver the scale, speed, or sophistication needed for India to become a global critical mineral powerhouse.
Building the New Model: Three Strategic Shifts
1. Expand the PLI Scheme to Strategic Minerals
The Production Linked Incentive (PLI) has helped build scale in electronics and manufacturing. It must now extend upstream—to mineral exploration, processing, and global asset acquisition. Like China’s early investments in Africa and Latin America, Indian firms must be incentivised to go global.
2. Enable PSUs to Co-Invest with Private Players
PSUs have capital strength and institutional depth. These should be leveraged for minority co-investments in private ventures focused on refining, tech, and advanced materials—similar to how the US Pentagon catalysed MP Materials.
3. Simplify Exploration Regulation and Speed Licensing
India’s mineral licensing remains slow and fragmented. NCMM must streamline approvals, adopt modern surveying tech, and enable private data access. Technologies like 3D LiDAR and muon tomography can fast-track viable projects—speed is now strategic currency.
A Strategic Imperative, Not Just an Economic One
Rare earths are the tip of the iceberg. The future of defence systems, clean tech, and semiconductors rests on building secure, domestic supply chains.
As global alliances shift towards friend-shoring and near-shoring, India has an edge: technical talent, manufacturing potential, and institutional stability. But this opportunity demands public–private collaboration.
Self-Reliance Needs More Than Mines
Success means building an ecosystem, not just opening mines:
- The state must offer vision, policy clarity, and risk-sharing mechanisms
- Private enterprise must execute with speed, innovation, and global ambition
- Academic and research institutions must develop next-gen materials and processing tech
Together, this trio can turn India’s import-dependence into industrial strength, powering both national security and global supply chains.
A Turning Point India Cannot Miss
China’s tactics have shown both the power and risk of supply chain dominance. For India, the lesson is to not just diversify away from China—but to create irreversible capabilities at home and abroad.
By fusing policy intent with private-sector execution, India can shape the next chapter of global trade—where critical minerals form the bedrock of economic sovereignty.
