Rare Earth Minerals in India: How Emerging Sectors Could Be Shaken by China’s Export Curbs

With China imposing tighter export restrictions on certain rare earth minerals, supply chains worldwide are feeling the strain.

From smartphones and wind turbines to electric vehicles (EVs) and military equipment, these elements play a crucial role in modern manufacturing. 

Post China’s restrictions, the European automotive industry has already raised alarms. Major Indian manufacturers, including EV makers like Maruti Suzuki, have been forced to revise production plans.

Let’s explore how rare earth mineral dynamics are reshaping global supply chains, where India currently stands, and what needs to happen next.

Why Do Rare Earth Minerals Matter?

Rare earth elements (REEs) are a group of 17 chemically similar metals. Despite the name, they aren’t rare in the Earth’s crust. However, they are difficult to extract and process economically, which makes their supply limited.

REEs include elements like neodymium, praseodymium, dysprosium, yttrium, and terbium. These are key to making high-performance magnets used in EV motors, wind turbines, consumer electronics, and even defence applications.

In simple terms—without these minerals, much of the technology we rely on would not exist.

China’s Dominance and the Global Shockwaves

Today, China controls an estimated 60% of global rare earth and mines an even greater share: 92% of processing capacity. It is the undisputed giant in this space. 

In early April, Beijing imposed new export controls on seven rare earth elements and related permanent magnets. The move came in response to broad US tariffs announced by President Donald Trump. 

Although the tariffs apply to all US trade partners, China has been a key focus of the Trump administration’s trade policy. This development marks a further escalation in the ongoing trade tensions between the two nations.

Source: Business Standard

Ripple Effects of China’s Monopoly

• European automakers warn of production slowdowns.
• Indian EV players are revising targets. Maruti Suzuki recently indicated that planned EV production may not fully meet demand this year due to component supply issues.
• Battery and electronics makers globally are scrambling for alternative suppliers.
• Prices of key rare earth materials are showing spikes and volatility.
  

How Is India Impacted?

India’s exposure to rare earth risks is growing because its industries are undergoing rapid digital and green transitions.

Here’s how key sectors are affected:

1. Electric Vehicles (EVs)

India aims for 30% EV penetration by 2030. But rare earth-based magnets are at the heart of EV motors. Supply disruptions are causing uncertainty for both manufacturers and suppliers. Maruti Suzuki’s recent move to scale down targets is just one example.

2. Renewable Energy

India is scaling up wind power capacity. Wind turbines rely on rare earth magnets. Constraints in rare earth supply could delay or make projects costlier.

3. Electronics

The country imports a large volume of components for smartphones, laptops, and other consumer electronics. Many of these components use rare earth materials. Price volatility can affect the competitiveness of Indian electronics exports.

4. Defence

Certain rare earths are essential for advanced military hardware. Import dependence leaves a potential vulnerability.

In short—rare earth dependency is now a supply chain risk India cannot ignore.

Where Does India Stand Today?

India does possess significant rare earth mineral reserves. According to estimates, India holds about 6% of the world’s rare earth resources.

Key deposits include:

• Monazite sands in coastal states like Kerala, Odisha, and Tamil Nadu.
• Deposits in Jharkhand and Andhra Pradesh.
  

However, India lags in commercial extraction and processing. Most rare earth extraction is controlled by Indian Rare Earths Ltd. (IREL), a government enterprise. Processing capacity is limited, and the country still imports many processed rare earth products.

Moreover, environmental regulations around mining monazite sands and separating rare earths are complex and stringent. While this ensures sustainable practices, it has also slowed capacity building.

Key challenges:

• Processing bottlenecks: Mining is only half the battle; refining and separating rare earths is capital-intensive and technically demanding.
• Private sector participation: Until recently, rare earth extraction was largely restricted to public-sector entities.
• Global competition: Countries like Australia, Vietnam, and the US are also racing to diversify away from Chinese supply, raising competition for alternative sources.
  

How India is Catching Up

India is now taking urgent steps to strengthen its rare earth capabilities.

1. Policy Reforms

The government has been gradually opening up the rare earth sector to private players. In 2023, India allowed private companies to explore and mine critical minerals, including rare earths, under new auction rules.

2. International Partnerships

India is in talks with Australia, Japan, and the US to collaborate on rare earth supply chains. Such partnerships aim to ensure stable imports while India builds its own capacity.

3. Strategic Stockpiles

There is increasing discussion around creating strategic reserves of critical minerals, much like oil reserves, to buffer against supply shocks.

4. Focus on Processing

India is exploring ways to build domestic refining and processing units, which will add value to locally mined minerals and reduce import dependency.

5. Supply Chain Diversification

Manufacturers are being encouraged to diversify sourcing and explore materials innovation to reduce dependence on Chinese rare earths.

The Road Ahead

The rare earth challenge is not short term. It is a structural risk India must manage carefully.

• In the short term, expect higher prices and some supply volatility, especially in EVs and electronics.
• In the medium term, India must build processing capacity, foster private investment, and deepen international alliances.
• In the long term, India’s abundant reserves give it an opportunity to emerge as a reliable supplier of rare earths—if the right investments and policies are sustained.
  

The global race for critical minerals is well underway. For India, this is not just about reducing risks—it is a strategic opportunity to lead in new industrial value chains.

We must act decisively now to secure our position in this high-stakes game—not just as an importer, but as a future leader in sustainable supply chains.

FAQs

Q1. Why are rare earth minerals important for India?
Rare earth minerals are vital for India’s green and digital growth. They are used in EV motors, wind turbines, electronics, and defence equipment—all priority sectors for India.

Q2. What is the current impact of China’s export restrictions?
India’s EV manufacturers are facing component supply delays and cost increases. The electronics industry is also under pressure. Wind energy projects may see slower implementation due to rare earth shortages.

Q3. Does India have rare earth reserves?
Yes. India holds about 6% of the world’s rare earth resources, mainly in monazite sands. However, commercial extraction and processing capacity is still under development.

Q4. What steps is India taking to reduce dependency?
India is allowing private sector participation, building partnerships with countries like Australia, developing processing capacity, and considering strategic reserves of rare earth minerals.

Q5. What should Indian businesses do in the meantime?
Businesses should diversify suppliers, explore material substitution where possible, and collaborate with government and international partners to secure stable rare earth supply.

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