How Is China's Rare Earth Monopoly Creating Opportunities for India?
China's dominance in the global rare earth market has created significant vulnerabilities in supply chains, particularly for industries reliant on these critical minerals energy transition. This geopolitical reality presents a strategic opening for India to develop its substantial rare earth resources and establish itself as an alternative supplier. With growing concerns over China's export restrictions and trade war impacts, India's untapped potential in rare earth elements (REEs) is gaining renewed attention from investors and policymakers alike.
China's Tightening Grip on Global Supply
China currently controls approximately 90% of the global rare earth magnet market, creating a precarious dependency for industries worldwide. Recent developments have highlighted this vulnerability:
- In April 2025, China implemented stricter export licensing requirements for critical REEs like terbium and dysprosium
- These elements are essential components in Neodymium-Iron-Boron (NdFeB) magnets used in EVs, wind turbines, and defense systems
- China's share of global rare earth mining is projected to decline to 51% by 2030
- Its refining capacity is expected to decrease to 76% by 2030 as supply chains diversify
"India is poised to play a key role in building a more diversified global rare earths supply chain," notes Gracelin Baskaran, Director of the CSIS Critical Minerals Security Program, highlighting the strategic opportunity for India amid the shifting landscape.
Geopolitical Tensions Driving Supply Chain Diversification
The current geopolitical landscape has accelerated efforts to reduce dependence on Chinese rare earths. As countries seek to secure their supply chains, resource-rich nations like India are positioned to benefit from this strategic shift.
The ripple effects of China's export controls extend beyond immediate supply disruptions. Industries worldwide are now reassessing their vulnerability to single-source dependencies, creating a market opportunity for countries with untapped reserves. This diversification trend isn't merely about securing alternative suppliers—it represents a fundamental restructuring of global mineral supply chains that could reshape industrial competitiveness for decades.
What Makes India a Potential Rare Earth Powerhouse?
India possesses significant natural advantages that could enable it to become a key player in the global rare earth market. However, several challenges must be addressed to fully realize this potential.
India's Substantial Rare Earth Reserves
India's geological endowment provides a solid foundation for developing its rare earth industry:
- Third-largest global share of REE deposits at 6.9 million tonnes (after China's 44 million tonnes)
- Approximately 8% of the world's rare earth reserves
- Possesses about 35% of global beach and sand mineral deposits
- Current reserves estimated at 250 times higher than current mining output
- Primary deposits located in coastal regions of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, and West Bengal
- Additional reserves in Jharkhand, Gujarat, and Maharashtra
What makes India's reserves particularly valuable is their distribution across multiple states, creating potential for regionally balanced development. The coastal location of many deposits also offers logistical advantages for eventual export operations, though environmental sensitivities in these areas present unique regulatory challenges.
Current Production vs. Potential
Despite its significant reserves, India's rare earth production remains limited:
- Annual output of just 2,900 tonnes from 2012 to 2024
- IREL (India) Ltd. achieved record production of 531,000 tonnes in FY24
- Rare Earth Extraction Plant in Odisha saw a 9.8% increase in chemical output
- Domestic rare earth magnet demand surged from 12,400 tonnes in FY21 to nearly 54,000 tonnes in FY25
- Market projected to reach USD 993 million by 2033
This dramatic gap between geological potential and actual output represents both a challenge and an opportunity. The rapid growth in domestic demand creates a compelling economic case for scaled production, while the strategic importance of these minerals adds a national security dimension to development efforts.
What Challenges Is India Facing in Rare Earth Development?
While India has significant potential in the rare earth sector, several obstacles have hindered development of a robust industry.
Regulatory and Legal Constraints
The existing legal framework has limited private sector participation:
- The Atomic Energy Act, 1962 designates monazite as a "prescribed substance" due to thorium content
- Mining of these minerals has historically been reserved for public sector entities
- This restriction has prevented private investment and limited scaling opportunities
- Recent amendments to the Mines and Minerals (Development and Regulation) Act now permit private exploration of non-radioactive rare earths
The regulatory environment presents a complex balance between national security interests related to thorium—a potential nuclear fuel—and economic development goals. This tension has created significant barriers to entry for private enterprises, though recent reforms signal a shift in policy priorities.
Technical and Infrastructure Limitations
India faces several technical challenges in developing its rare earth industry:
- Limited refining technologies and processing capabilities
- Insufficient technical expertise in advanced separation techniques
- Inadequate mining infrastructure for efficient extraction
- Many of India's reserves are lean and complex to extract
- Underdeveloped end-to-end value chain from extraction to magnet manufacturing
- Need for focused R&D to move beyond producing REE oxides to manufacturing value-added products
According to Abhijit Kulkarni of EY Parthenon, "The technical gap in processing capabilities remains a significant hurdle for India's rare earth ambitions." This expertise deficit is particularly acute in the separation of individual rare earth elements, which requires sophisticated solvent extraction techniques that have been refined over decades in China.
Environmental and Permitting Issues
Development has been hampered by regulatory hurdles:
- Delays in obtaining mining permits and environmental clearances
- Coastal Regulation Zone (CRZ) guidelines restricting certain activities
- Environmental concerns that previously discouraged rare earth mining
The environmental challenges are particularly complex because many of India's rare earth deposits contain radioactive elements like thorium. Developing sustainable extraction methods that address these environmental and safety concerns is essential for the industry's long-term viability.
How Is India Building Strategic Partnerships for Rare Earth Development?
Recognizing the importance of international collaboration, India is forging strategic partnerships to strengthen its position in the rare earth market.
Australia-India Critical Minerals Collaboration
Australia has emerged as a key partner in India's lithium strategy:
- India-Australia Critical Minerals Investment Partnership established through a March 2022 MoU
- Agreement between Khanij Bidesh India Ltd (KABIL) and Australia's Critical Minerals Facilitation Office
- Active discussions to secure access to Australian rare earth minerals amid global shortages
- Opportunity for India to acquire early-stage mining blocks through Australian partnerships
- CSIRO-led India-Australia Critical Minerals Research Partnership funded through 2026
- Joint research across the entire value chain from exploration to recycling
This partnership leverages Australia's expertise in sustainable mining practices and advanced processing technologies, offering India an accelerated path to capability development. The research collaboration is particularly valuable as it addresses technical challenges throughout the supply chain.
Learning from Japan's Experience
Japan's response to China's 2010 export restrictions offers valuable lessons:
- Following a territorial dispute, China halted rare earth exports to Japan
- Japan invested in Australia's Lynas Rare Earths via the Japan Australia Rare Earths (JARE) joint venture
- Secured $450 million in funding over several years
- Reduced dependence on Chinese REEs from over 90% to around 58% by 2022
- Demonstrated the effectiveness of state-led, targeted supply chain diversification
Japan's experience provides a blueprint for how determined policy intervention can reshape supply chains relatively quickly. The Japan-Australia partnership transformed Lynas into the largest rare earth producer outside China, creating a viable alternative supply source that enhanced Japan's economic security.
Global Diversification Efforts
India is expanding its international reach beyond Australia:
- IREL scouting for REE resources in Oman, Vietnam, Sri Lanka, and Bangladesh
- KABIL pursuing overseas mineral assets in multiple regions
- Prime Minister Modi's visits to Argentina and Brazil targeting lithium-rich "Triangle" resources
- January 2024 agreement with Argentina's CAMYEN SE for lithium exploration over 15,703 hectares
- Due diligence underway for lithium and cobalt projects in Australia
This multi-pronged approach reflects India's recognition that domestic resources alone may not meet its strategic minerals requirements. By securing access to overseas assets, India is positioning itself within a broader network of alternative suppliers challenging China's dominance.
What Government Initiatives Are Driving India's Rare Earth Strategy?
The Indian government has launched several initiatives to boost the country's rare earth capabilities and reduce import dependence.
National Critical Mineral Mission (NCMM)
Launched in 2025, the NCMM aims to strengthen India's self-reliance in critical minerals:
- Comprehensive approach covering exploration, mining, processing, and recycling
- Geological Survey of India (GSI) to conduct 1,200 exploration projects by 2030-31
- Planned auctions for over 100 mineral blocks
- Exploration of offshore polymetallic nodules
- Relaxed rules to enable mineral recovery from secondary sources like fly ash and red mud
- Fast-track approval mechanism and new Exploration License
- Proposed Centre of Excellence on Critical Minerals (CECM) to guide policy
The mission represents the most ambitious government effort to date in addressing India's critical mineral security. By taking a holistic approach that spans the entire value chain, the NCMM aims to overcome the fragmented policy landscape that has hindered development in the past.
Production-Linked Incentive (PLI) Scheme
The government is implementing financial incentives to boost domestic production:
- Finalizing a Rs 3,500-5,000 crore PLI scheme for rare earth magnets
- Initial Rs 1,000 crore outlay to boost domestic magnet production to 1,500 tonnes
- Incentives and capital subsidies to enhance domestic mining and processing
- Exploring partnerships between IREL and private sector
The PLI scheme specifically targets the high-value-added segments of the rare earth value chain, recognizing that magnet manufacturing offers greater economic returns than mere mineral extraction. This focus on downstream activities reflects a maturing approach to industrial policy in the sector.
IREL's Expanding Role
IREL (India) Ltd., under the Department of Atomic Energy, is taking on new initiatives:
- Manufacturing rare earth magnets and metals at Visakhapatnam and Bhopal facilities
- Products being tested by BARC and DMRL for quality assurance
- Plans to supply around 500 tonnes of raw materials to OEMs
- Diversifying supply chains through international resource acquisition
As the primary public sector entity in India's rare earth sector, IREL's expanding mandate signals the government's commitment to developing domestic capabilities. The company's vertical integration efforts—moving from mining to magnet manufacturing—aim to capture more value within India's borders.
What Private Sector Opportunities Are Emerging in India's Rare Earth Industry?
While direct mining of radioactive REEs remains restricted to the public sector, private companies are increasingly exploring downstream opportunities.
Magnet Manufacturing Ventures
Several companies are entering the rare earth magnet manufacturing space:
- Sona Comstar plans to begin magnet production by end-2025
- Vedanta and Hindustan Zinc exploring entry into the sector
- Midwest Advanced Materials Pvt Ltd in Hyderabad received Ministry of Science and Technology support for local magnet production
- 13 non-radioactive rare earth acreages have already been auctioned to private entities
The private sector's growing interest reflects both the strategic importance of rare earth magnets and their commercial potential. Automotive component manufacturers like Sona Comstar are particularly motivated by the need to secure magnet supplies for electric vehicle production, highlighting how rare earth strategy intersects with India's broader transportation electrification goals.
Market Growth Drivers
Private sector interest is being fueled by expanding domestic demand:
- EV market projected to reach 6.3 million units by 2027
- Wind energy capacity expected to grow from 42 GW to 140 GW by 2030
- Defense sector requirements for high-performance magnets
- Growing electronics and renewable energy industries
These converging growth trends create a compelling business case for private investment. The projected tripling of wind energy capacity is particularly significant, as each megawatt of wind power typically requires 200-600 kg of rare earth magnets, depending on turbine design.
How Do Rare Earths Fit Into India's Broader Mineral Strategy?
India's rare earth ambitions are part of a comprehensive approach to critical minerals essential for the country's economic and technological development.
Beyond Rare Earths: India's Critical Mineral Portfolio
The NCMM identifies 30 critical minerals beyond rare earths:
- Includes lithium, cobalt, and nickel for EV batteries and clean energy
- Strategic focus on minerals essential for renewable energy transition
- Emphasis on minerals needed for advanced manufacturing and defense applications
This integrated approach recognizes the interconnected nature of mineral supply chains. For example, the shift to electric vehicles requires not only rare earth magnets for motors but also lithium, cobalt, and nickel for batteries—creating multiple mineral dependencies that must be addressed simultaneously.
Clean Energy Transition Goals
India's critical mineral strategy supports ambitious climate targets:
- Aim to reduce GDP emissions intensity by 45% by 2030 (from 2005 levels)
- Target of 50% electric power capacity from non-fossil sources by 2030
- Goal to reach net-zero emissions by 2070
- Critical minerals essential for achieving these climate objectives
The mineral strategy thus becomes a key enabler of India's energy transition, highlighting how resource security and climate policy are increasingly intertwined. Without secure access to Australia's critical minerals, India's renewable energy and electrification goals would face significant implementation challenges.
What Are the Economic Implications of India's Rare Earth Development?
The development of India's rare earth industry could have significant economic benefits while addressing strategic vulnerabilities.
Import Substitution and Export Potential
Building domestic capacity could reduce import dependence and create export opportunities:
- India's rare earth imports rose 88% to 53,700 tonnes in FY25
- Import value increased 5% to Rs 1,744 crore
- Domestic production could save foreign exchange and reduce trade deficits
- Potential to become an alternative supplier to countries seeking to diversify from China
The economic case for import substitution is compelling, particularly as global demand for rare earth products continues to grow. Moreover, as other countries also seek to reduce dependence on Chinese supplies, India could position itself as a preferred alternative supplier, particularly to partners in the Quad and broader Indo-Pacific region.
Job Creation and Industrial Development
A robust rare earth industry could stimulate broader economic growth:
- Creation of high-skilled jobs in mining, processing, and manufacturing
- Development of specialized technical expertise
- Establishment of new industrial clusters
- Strengthening of domestic supply chains for strategic industries
The employment potential extends beyond direct mining jobs to include positions in advanced materials science, chemical engineering, and precision manufacturing. These higher-value roles could help address India's challenge of creating quality employment opportunities for its educated workforce.
What Is the Future Outlook for India's Rare Earth Industry?
Despite challenges, India's rare earth sector shows promising potential for growth and development.
Short-Term Priorities
Immediate focus areas for developing India's rare earth capabilities:
- Streamlining regulatory processes to facilitate private investment
- Building technical expertise through international partnerships
- Developing processing capabilities to move up the value chain
- Implementing incentive schemes to boost domestic production
The regulatory reforms are particularly urgent, as they would unlock private capital for industry development. The recent amendments to the MMDR Act represent progress, but further changes to the Atomic Energy Act may be necessary to fully liberalize the sector while maintaining appropriate safeguards for radioactive materials.
Long-Term Vision
Strategic objectives for India's rare earth industry:
- Establishing India as a reliable alternative supplier in global supply chains
- Developing end-to-end capabilities from mining to magnet manufacturing
- Creating a sustainable and environmentally responsible rare earth industry
- Leveraging rare earth resources to support broader mining industry innovation
Achieving this vision will require sustained policy focus, significant capital investment, and strategic international partnerships. Success would transform India from a minor player to a significant force in global rare earth markets, enhancing both economic competitiveness and strategic autonomy.
FAQ: India's Rare Earth Opportunity
What are rare earth elements and why are they important?
Rare earth elements (REEs) are a group of 17 metallic elements that, despite their name, are relatively abundant in the Earth's crust. They're crucial for manufacturing high-performance magnets used in electric vehicles, wind turbines, electronics, and defense systems. Their unique properties enable miniaturization, efficiency, and performance characteristics that alternative materials cannot provide.
Why is China's dominance in rare earths concerning?
China's control of approximately 90% of the global rare earth magnet market creates significant supply chain vulnerabilities. Recent export restrictions on critical elements like terbium and dysprosium highlight how [geopolitical tensions can disrupt supplies](https://www.outlookbusiness.com/magazine/can-india-break-china-rare-earth-chokehold-in-ev-defence-tech-critical-
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