India’s Rare Earth Strategy Amid China’s Export Curbs

Context:

• India is preparing a ₹3,500–₹5,000 crore scheme to scale up domestic production of rare earth minerals and magnets, following China’s export restrictions (April 2025).

• China’s move has caused global shortages in magnets critical for EVs, defence (jet fighters), electronics, and renewable technologies.

Key Highlights for Prelims:

Rare Earths:

• Rare Earth Elements (REEs): 17 chemically similar elements, critical for high-tech magnets, EV motors, missiles, wind turbines, and smartphones.

• Rare earth elements are not actually rare—they are relatively abundant in the Earth’s crust but are difficult to mine and refine, which makes them valuable.

• Permanent Rare Earth Magnets: India imported 53,748 metric tons in FY 2024–25, mostly from China.

• India’s Reserves: 6.9 million metric tons – 5th largest globally.

• No domestic magnet manufacturing facility currently in India.

China’s Role:

• Produces 90% of global permanent magnets.

• On April 4, 2025, China imposed export controls on:

  • 7 specific rare earth elements.

  • Magnets with even trace amounts of rare earths.

• May 2025 exports dropped 61% YoY, reaching a 5-year low (2,117 tonnes) – lowest since Feb 2020.

India’s Response:

• Incentive scheme to be launched soon; reverse auction model planned.

• At least five Indian companies have shown interest in REE and magnet production.

• Ministerial review stressed diversification and reducing import dependency.

• Amendments proposed to the Mines and Minerals (Development and Regulation) Act.

• Commercial magnet production expected to begin later in 2025.

Strategic Moves:

• India directed IREL (Indian Rare Earths Ltd) to halt a 13-year rare earth export deal with Japan, especially for neodymium.

• Objective: Prioritize domestic processing and secure supply chains for India’s EV and strategic sectors.

• Commerce Minister Piyush Goyal instructed the halt to conserve critical minerals for national use.

UPSC Mains :

GS Paper III – Economy, Science & Tech, Internal Security

1. Strategic Significance of Rare Earths:

• Backbone of EVs, green energy, semiconductors, and defence tech.

• Supply shocks pose economic and national security risks.

• Dependence on a single supplier (China) exposes India to geopolitical risks.

2. India’s Rare Earth Policy Gaps:

• Despite rich reserves, lack of domestic value chain (mining to magnets).

• Poor R&D and processing capabilities.

• No domestic ecosystem for high-purity rare earth metallurgy or magnet fabrication.

3. Policy Recommendations:

• Boost public-private R&D in rare earth extraction and refining.

• Fast-track amendments to mining laws.

• Incentivize downstream manufacturing (magnet production).

• Ensure strategic stockpiling and export restrictions during shortages.

4. Global Comparisons:

• US, EU, and Japan are also scrambling to reduce Chinese dependence.

• India can position itself as an alternate hub for rare earths through Make in India, PLI, and international partnerships.

India’s ₹5,000 crore rare earth scheme marks a critical policy shift towards strategic autonomy in critical minerals, amidst growing geo-economic tensions. A well-executed rare earth policy is key to achieving Atmanirbhar Bharat in defence, green energy, and electronics manufacturing.