Rare earths sit at the centre of today’s industrial economy. Electric vehicles, renewable energy systems, defence electronics, semiconductors, and advanced manufacturing all depend on them. For India, which seeks to scale manufacturing and enhance strategic autonomy, control over rare earth supply chains is no longer optional. It is a binding constraint on growth, competitiveness, and geopolitical leverage.
Yet recent remarks by Chief Economic Advisor V Anantha Nageswaran underline an uncomfortable truth. Key segments—rare earth permanent magnets (REPMs), battery cells and cathode materials, and solar wafers—fall in the “low-to-medium feasibility” category for domestic indigenisation. This is not bureaucratic caution. It reflects the combined weight of upstream constraints, technological barriers, environmental limits, and global market concentration.
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China’s chokehold is structural, not accidental
Rare earth permanent magnets are indispensable to modern manufacturing. India’s vulnerability is not merely from import dependence but from the extraordinary concentration of global supply. In 2024–25, India’s imports of permanent magnets nearly doubled to about 57,000 tonnes, up from 28,700 tonnes the previous year. Roughly 93% of these imports came from China.
That dependence became visible when Beijing tightened export licensing for certain rare earth magnets in April 2025. The impact rippled through India’s automotive and electric vehicle supply chains, disrupting production schedules and exposing how thin domestic buffers really are.
China’s dominance is not a consequence of geological luck alone. It reflects decades of patient capital deployment, technology accumulation, scale creation, and a willingness to absorb environmental costs that other economies chose to avoid. These advantages extend from mining and beneficiation to processing and final magnet production. They cannot be neutralised quickly through policy announcements.
Mining bottlenecks limit downstream ambition
India’s rare earth challenge begins well before magnet fabrication. The country does possess resources, largely in monazite-bearing beach sands. But access to these deposits is constrained by atomic energy regulations because monazite contains thorium. As a result, mining and initial processing are dominated by a single public sector entity, with limited scale and slow project execution.
Private participation remains tightly restricted, discouraging capital inflows, technology transfer, and operational risk-taking. Without easing upstream bottlenecks, downstream incentives risk creating capacity that lacks secure access to raw materials. China’s advantage begins at the mine, not at the factory gate.
READ | Rare earth quest: India must shake off dependence on China
Incentives help, but they cannot compress time
New Delhi’s response to China’s export tightening was swift. The government announced a ₹7,280-crore incentive scheme to promote domestic manufacturing of sintered rare earth permanent magnets. The objective was clear: create capacity, reduce import dependence, and signal seriousness to global supply chains.
But incentives do not collapse learning curves. Rare earth processing involves complex metallurgy, strict environmental management, and sustained demand to justify scale. India’s regulatory environment—shaped by judicial scrutiny, environmental safeguards, and public opposition—makes Chinese-style tolerance of pollution politically infeasible. This constraint is structural, not procedural.
Even with policy support, building a globally competitive ecosystem will take years. China’s lead is measured in decades. Seen in this light, the CEA’s assessment is not pessimism. It is realism.
Industrial strategy must accept partial wins
The rare earth debate reveals a deeper shift in the global economic order. Trade is no longer governed solely by cost efficiency and comparative advantage. It is increasingly shaped by geopolitics, national security, and industrial policy. Export controls on advanced technologies and carbon border measures are not exceptions; they are becoming standard instruments.
In such a world, self-reliance is not autarky. It is risk management. Dependence on a single dominant supplier is a strategic liability, especially when diplomatic alignments are fluid. India does not need comprehensive self-sufficiency across all rare earth applications. It needs assured access where failure would have disproportionate economic or security consequences.
This opens the case for strategic stockpiling for defence-critical uses, differentiated from commercial demand. Countries such as Japan and the United States have relied on such buffers to manage supply disruptions without attempting full indigenisation.
READ | China’s rare earth curbs threaten India’s EV ambitions
Recycling promises relief, but only at the margins
Recycling and urban mining are often cited as solutions. Their role is real, but limited. Globally, recycling rates for rare earths remain low, often below 10%, due to technical difficulties in separation and weak collection economics. India lacks a structured ecosystem for recovering rare earths from end-of-life EV motors, wind turbines, and electronics.
Recycling will improve over time, but it cannot substitute for primary supply in the near term. Treating it as a quick fix risks overstating resilience.
Clusters, demand shaping, and selective partnerships
Another lesson from global industrialisation is that manufacturing capabilities do not emerge in isolation. They flourish in dense ecosystems where suppliers, skills, logistics, and infrastructure co-locate. From Manchester’s textiles to Shenzhen’s electronics, industrial success has been spatially concentrated.
India’s difficulty in creating such clusters at scale has long constrained its manufacturing ambitions. Rare earths will be no exception. Without concentration, individual projects will remain sub-scale and uncompetitive.
Demand-side strategy also matters. China used assured demand to build scale. India can influence demand through phased localisation mandates, design choices that reduce rare earth intensity, and support for alternative motor technologies. Industrial policy is not only about supply.
Finally, international partnerships must be specific and realistic. Alignments with resource-rich economies and technology leaders can reduce risk, but they are no substitute for domestic capability. Over-reliance on external alliances can recreate the very vulnerabilities India is trying to escape.
The illusion of quick breakthroughs in rare earths has faded. What remains is the harder task of building resilience incrementally. In a world where economic security and national security increasingly overlap, complacency is not an option.
India’s rare earth strategy must be grounded in realism, patience, and selective ambition. Securing partial control over critical inputs—mining where feasible, processing at scale, buffers for defence, and diversified sourcing—will strengthen the economy’s ability to absorb shocks without derailing growth. That, more than sweeping declarations, is the measure of strategic maturity.