China’s near-monopoly over rare earth elements poses a serious threat to India’s ambitions of becoming a global manufacturing and technological powerhouse. With Beijing tightening export controls on critical minerals, several Indian industries—particularly in automobiles, electronics, defence, and clean energy—now face acute supply constraints that could derail production lines and stall the country’s industrial growth trajectory.
The crisis is already visible. Imports of permanent magnets—many of which contain rare earth elements —almost doubled in 2024–25, reaching close to 57,000 tonne from around 28,700 tonne the previous year. Of these, an overwhelming 93% came from China, highlighting India’s entrenched dependence on a single supplier. This import surge occurred even before China’s April 4 decision to restrict exports of rare earth magnets, a move that has since rippled across global supply chains. In India, the situation is precarious: industry insiders estimate that current stocks may last no more than 2–3 weeks.
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In response, executives from key sectors are expected to travel to China in an effort to secure emergency shipments. Auto industry bodies have urged the Indian government to step in, warning of a looming shortage that could halt vehicle production. Policy Circle earlier reported on how these supply disruptions threaten not only near-term industrial activity but also India’s longer-term plans for clean energy, EVs, and indigenous defence manufacturing.
Why rare earths matter
Rare earth elements—17 in all, including neodymium, dysprosium, samarium, and gadolinium—are essential for a range of high-tech applications. They power everything from smartphones and wind turbines to missile guidance systems, EV motors, and MRI machines. While rare earth elements are not geologically rare, they are seldom found in concentrated, economically viable deposits. The real bottleneck lies in the complex and toxic refining process, where China has built unmatched expertise and scale over three decades.
Since the 1990s, China has treated rare earth elements as strategic assets, investing heavily in mining and refining capacity while undercutting global competitors. Today, it controls between 85% and 95% of the global REE supply chain—from extraction to processing. This dominance gives Beijing immense geopolitical leverage. The latest export curbs—ostensibly targeting military end-uses—apply to critical elements like terbium, lutetium, and scandium. But their impact is sweeping, hitting commercial sectors worldwide.
EV ambitions at risk
The Indian automobile sector is particularly exposed. Electric vehicles rely heavily on neodymium-iron-boron (NdFeB) magnets for traction motors due to their high magnetic strength and energy efficiency. With domestic production virtually non-existent, EV makers like Bajaj Auto have sounded alarm bells. The Society of Indian Automobile Manufacturers (SIAM) made a formal presentation to government officials on May 28, urging swift bilateral engagement with China to clear pending approvals and simplify regulatory barriers.
Any prolonged disruption could delay EV rollouts, raise input costs due to the need to import entire motor assemblies, and push India off track in meeting its green mobility targets. This would not only hurt manufacturers but also compromise India’s climate commitments under the Paris Agreement.
Clean energy and defence in the crosshairs
The ripple effects go beyond the automotive sector. India’s wind energy sector—which underpins its renewable energy goal of 500 GW by 2030—also depends on permanent magnets for turbine generators. With over 90% of these magnets sourced from China, delays in delivery could derail project timelines and investor confidence.
Defence and aerospace sectors face even graver consequences. Rare earths are essential in critical technologies like radar systems, satellites, missile components, and jet engines. China’s requirement that importers certify non-military use introduces further delays and opacity, threatening India’s defence modernisation and strategic autonomy. At a time of regional security flux, such a vulnerability has profound national security implications.
Electronics and medical devices under pressure
The electronics and medical device sectors—cornerstones of the “Make in India” initiative—are also heavily reliant on Chinese inputs. Without domestic capabilities to refine rare earth elements into high-purity oxides and alloys, India’s competitiveness in global electronics markets could be compromised. The lack of domestic downstream processing makes the entire sector hostage to China’s trade policies.
China’s export curbs could, paradoxically, be a turning point. By squeezing supply, Beijing may inadvertently accelerate global diversification. Already, policymakers and industry leaders in the US, Europe, and Japan are considering investments in refining. Once those supply chains mature, China’s grip could loosen—perhaps irreversibly.
India has resources, but not capacity
India is not without options. The country holds an estimated 6.9 million metric tonnes of rare earth reserves—roughly one-sixth of China’s. Yet, domestic production remains negligible due to technological constraints, environmental concerns, and institutional bottlenecks. IREL, the state-owned enterprise with exclusive rights to monazite mining, lacks the capacity for commercial-scale magnet manufacturing.
Three REE blocks—one each in Karnataka, Uttar Pradesh, and Chhattisgarh—have been auctioned recently, and more exploration is underway. But without modern refining infrastructure, these reserves will not translate into strategic advantage. Simply having resources is not enough—India must develop the technological and industrial ecosystems to harness them.
Policy needs to step up
What India needs now is an aggressive, targeted industrial strategy. A dedicated Production-Linked Incentive (PLI) scheme for rare earth magnets and critical mineral recycling would be a good start. Such a scheme should incentivise domestic refining, private R&D in magnet metallurgy, and the setting up of joint ventures with countries like Australia and Japan that have both deposits and democratic alignment.
In the short term, India must also use its diplomatic leverage to work around China’s new export licensing regime. Timely intervention could help unlock stuck shipments and ensure continuity for vital sectors. Simultaneously, the government should diversify its REE imports from countries such as Mongolia, Myanmar, and Sri Lanka to reduce future risk.
China’s dominance in rare earths is not accidental—it is the result of decades of state-backed investment, environmental trade-offs, and industrial planning. For India to counter this, a patchwork of import deals will not suffice. It must commit to long-term capability building in refining, manufacturing, and circular economy systems. That will require coordination across ministries, strategic use of public-private partnerships, and a willingness to learn from China’s playbook.
The current crisis offers India a rare strategic opportunity. If it can break its REE dependence, it will not just secure its industrial future but also enhance its geopolitical standing. The alternative is continued vulnerability to a powerful neighbour’s economic coercion.