The US attack on Iran has sharpened a wider truth. Critical minerals are no longer a narrow industrial issue. They now sit at the intersection of trade policy, defence preparedness, energy transition and geopolitical leverage. Rare earth elements matter because they feed into magnets, electronics, turbines, semiconductors, defence systems and clean-energy equipment. China still dominates processing and magnet manufacturing, which is why the scramble to diversify supply chains has acquired urgency across Washington, Brussels, Tokyo and New Delhi.
India cannot treat this as someone else’s vulnerability. It has the world’s third-largest rare earth reserves, estimated at 6.9 million tonnes, yet continues to depend heavily on imports for permanent magnets and other downstream products. The paradox is now well known: a resource-rich country remains weak in processing, refining and manufacturing. That gap, rather than geology, is the real strategic problem.
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Rare earth corridors and industrial strategy
The Union Budget 2026-27 gave this issue a sharper policy shape. Finance Minister Nirmala Sitharaman proposed support for dedicated rare earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu. That proposal builds on the ₹7,280 crore scheme approved in November 2025 to establish an integrated domestic rare earth permanent magnet ecosystem, and on the National Critical Mineral Mission approved in January 2025. The stated objective is not merely more mining. It is to connect mining, processing, research and manufacturing inside India.
This is the right strategic direction. India’s weakness does not lie only in extraction. It lies in the missing middle of the value chain. As Rishabh Jain noted after the Budget, the real gap is between upstream mining and downstream manufacturing. Unless that gap is bridged, India will remain a supplier of raw potential and an importer of finished strategic inputs.
The commercial logic is straightforward. Permanent magnets are essential for electric vehicles, wind turbines, electronics, aerospace and defence. The government’s own scheme documents explicitly frame REPM production as a strategic manufacturing capability. If India can build even a modest domestic base, it would lower supply risk for sectors that will define industrial growth over the next decade.
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Rare earth mining and environmental risk
That said, strategic urgency is not a licence for ecological carelessness. Rare earth extraction and processing are not benign activities. Ion-exchange leaching and associated chemical processing can contaminate soil and water if poorly regulated. Yttrium shortages and China’s export controls may have pushed governments to move faster, but speed does not reduce environmental risk. It raises it.
India already knows the stakes. Kerala’s coastal belt, including parts of Kollam, has long figured in debates over mineral-sand extraction, radioactive monazite deposits and contamination risks. Monazite typically contains both rare earth oxides and thorium. That makes any expansion of extraction especially sensitive in coastal districts where ecology, fisheries and public health are tightly linked. The issue is not abstract environmentalism. It is whether the state can prevent strategic mining from becoming another case of localised damage imposed in the name of national development.
This is where the draft policy conversation remains thin. The Budget speech set out intent and geography. It did not spell out the regulatory architecture through which states will operationalise these corridors. That omission matters. Mining, land, coastal ecology, public health and local livelihoods cannot be treated as secondary questions to be settled later. If the institutional design is weak at the start, course correction becomes politically and environmentally expensive.
Federalism, safeguards and local consent
The federal dimension is therefore central, not incidental. The proposed corridors sit in mineral-rich states with their own political economies, ecological vulnerabilities and claims over natural resources. Any attempt to frame the programme as a purely central strategic mission will invite resistance. It will also be bad policy. The corridor model can work only if states are treated as partners in design, regulation and benefit-sharing, not just as host territories for extraction and processing.
That requires more than environmental clearances in the routine bureaucratic sense. It requires a framework that prices waste disposal, mandates credible remediation, monitors groundwater and coastal impact, and creates transparent liability for downstream harm. India does not need to copy another country’s law line by line. But it does need a system in which firms bear the cost of mitigation instead of passing it to fishing communities, farmers and local public health systems.
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A second safeguard is to reduce the pressure on fresh extraction. The National Critical Mineral Mission already includes a recycling component. That deserves much more policy attention than it has received so far. Recycling will not eliminate the need for mining, but it can reduce exposure to both import shocks and environmental damage. In strategic sectors, circularity is not just a sustainability slogan. It is a supply-security instrument.
India’s rare earth opportunity
India should certainly move to build a domestic rare earth and magnet ecosystem. The alternative is continued dependence on Chinese processing and repeated vulnerability to export controls, licensing shocks and geopolitical bargaining. But the choice is not between dependence and reckless acceleration. It is between building a disciplined industrial strategy and repeating the old pattern of extract first, regulate later.
That is why the rare earth corridors should be treated as a test of state capacity. If India can align strategic manufacturing, federal cooperation, environmental discipline and local compensation, the programme could become a model for critical-mineral policy. If it cannot, the country will have converted a legitimate strategic ambition into a familiar governance failure.
Lisa Deas and Sruti Samhita Malladi are students and Dr Barun Kumar Thakur teaches economics at FLAME University, Pune.