Critical minerals, essential for high-technology applications such as aerospace, semiconductors, batteries, and advanced electronics, are increasingly becoming the focal point of international economic diplomacy. For India, the quest for critical mineral security is not just an economic imperative but also a matter of strategic autonomy, given its dependence on imports, particularly from China, a nation that has repeatedly demonstrated its willingness to weaponise its mineral dominance.
China’s dominance in the critical minerals sector is built upon a foundation of vast resource reserves and strategic investments across the value chain. As the world’s largest mining nation, China has discovered 173 types of minerals, including 13 energy minerals, 59 metallic minerals, and 95 non-metallic minerals. Reserves of nearly 40 percent of these minerals, particularly Copper, Lead, Zinc, Nickel, Cobalt, Lithium, Gallium, Germanium, and crystalline Graphite, increased significantly in 2023, supported by an exploration investment of USD 19.4 billion. This led to the discovery of 132 new mineral deposits, including 34 large ones.
A comprehensive analysis of India’s import data reveals an acute vulnerability to Chinese supplies, particularly for minerals such as Bismuth, Lithium, Silicon, Titanium, Tellurium, and Graphite
When it comes to China’s approach to critical mineral exports, it is both strategic and calculated. Beijing targets minerals critical to Western nations and their allies, particularly those used in semiconductors, batteries, and high-tech manufacturing. This is not new, as it was evident in China’s 2010 rare earth embargo against Japan and recent restrictions on antimony, gallium, and germanium exports. Furthermore, China’s imposition of export controls is a calculated strategy guided by a series of criteria. Beijing is more likely to impose controls on minerals where it holds significant extraction and processing advantages, giving it substantial leverage. However, it is careful to balance these actions to avoid disrupting its own domestic industries and export sectors. This calculated approach underscores the need for countries like India to proactively secure their supply chains.
Despite possessing substantial mineral resources, India’s dependence on imports is compounded by several factors, including inadequate exploration and technological limitations
A comprehensive analysis of India’s import data reveals an acute vulnerability to Chinese supplies, particularly for minerals such as Bismuth, Lithium, Silicon, Titanium, Tellurium, and Graphite. For instance, India imports 85.6 percent of its Bismuth, 82 percent of its Lithium, 76 percent of its Silicon, 50.6 percent of its Titanium, 48.8 percent of its Tellurium, and 42.4 percent of its Graphite from China. These minerals are crucial for a variety of sectors, ranging from pharmaceuticals and electric vehicles to semiconductors and aerospace. This level of import dependence makes India vulnerable to supply chain disruptions that could severely impact its clean energy transition, digital infrastructure, and defence capabilities.
Despite possessing substantial mineral resources, India’s dependence on imports is compounded by several factors, including inadequate exploration and technological limitations. Many critical minerals are deep-seated, requiring high-risk investments in exploration and mining technologies, deterring private sector participation. India also lacks the processing capabilities for many of these minerals, further exacerbating its dependency on China. The case of lithium deposits in Jammu and Kashmir highlights this challenge. Although India has discovered 5.9 million tonnes of Lithium resources, it lacks the technology to extract Lithium from clay deposits, which is a technology that has not been commercially proven anywhere in the world yet.
In response to these challenges, the Indian government has taken several steps to enhance its critical mineral security. The Ministry of Mines identified 30 critical minerals deemed essential for national security and economic development. India has also established a designated body, Khanij Bidesh India Ltd. (KABIL), to secure overseas investments in critical minerals. Parliament passed amendments to the Mines and Minerals (Development & Regulation) Bill in 2023 to lift restrictive classifications on some rare earth elements, potentially opening the door for greater private-sector investment. A key highlight of these amendments is the introduction of an exploration license designed to attract specialised resource exploration agencies, including foreign companies, to survey potentially rich but geologically challenging deposits. The law also promises to reimburse 50 percent of the exploration expenditure once mining begins, aiming to de-risk early-stage operations.
However, despite these promising reforms, the results have been tepid. Only a handful of exploration licenses for minerals like Lithium, Rare Earth Elements (REE), and Graphite have been cleared, and most of those went to Indian public sector firms. Foreign participation is still sparse and mining license auctions for critical minerals have largely stalled. One major issue is India’s outdated resource classification system, which leaves miners uncertain about the commercial viability of mineral blocks. Many auctioned blocks in India have yet to reach advanced exploration status, making them riskier for potential bidders. The low demand for exploration licenses themselves indicates a significant gap in investor confidence. This brings to light the critical need for high-quality geological data and robust geological surveys in order to effectively mitigate ‘information asymmetry,’ where potential buyers (mining companies) and the seller (government) do not share a clear view of the resource’s true value.
The exploration of critical minerals needs a paradigm shift in approach. A possible remedy is to offer larger upfront fiscal incentives during the exploration phase, similar to how India supports the semiconductor industry. In chip manufacturing, India has adopted an aggressive approach, pledging direct capital support early in the construction phase. A similar model could work for critical minerals, offsetting immediate exploration costs instead of reimbursing them only after production begins. This upfront capital support could resolve a market failure and unlock value many times over in downstream mining, exploration, sales and exports.
Studies indicate that right-sizing EV batteries, alternative chemistries, and recycling could significantly reduce Lithium demand
Alongside domestic initiatives, India is also pursuing a multi-pronged strategy to diversify its supply sources and reduce its dependence on China. India has joined strategic initiatives like the Minerals Security Partnership (MSP) and the Critical Raw Materials Club to strengthen partnerships with like-minded nations. These partnerships are aimed at securing overseas mineral assets, particularly in resource-rich nations like Australia, Argentina, and Chile. India is also investing in research and development through institutions like the Geological Survey of India (GSI) and the Council for Scientific and Industrial Research (CSIR) while promoting recycling and circular economy practices to reduce virgin mineral dependency.
Recycling and circular economy practices are emerging as crucial strategies to reduce import dependence. Studies indicate that right-sizing EV batteries, alternative chemistries, and recycling could significantly reduce Lithium demand. Furthermore, recycled quantities of copper and cobalt could decrease primary supply requirements, with similar reductions possible for Lithium and Nickel. Without these initiatives, mining capital requirements would need to be significantly higher, highlighting the economic and strategic importance of developing a robust recycling infrastructure. Production-linked incentives for extracting critical minerals through recycling also seem promising.
India’s journey towards critical mineral security is fraught with challenges but also filled with opportunities. The nation needs to acknowledge the strategic nature of critical minerals as key to its technological and economic future. The key to success lies in combining aggressive policies with strategic partnerships, technological innovation, and a holistic approach to the entire value chain of critical minerals. India needs to shift from its reactive posture to a proactive stance, where it is not just responding to the challenges but also shaping the global dynamics of critical mineral supplies. By adopting a model similar to that of the semiconductor industry, with upfront capital support and fiscal incentives for exploration, India can unlock its vast mineral potential and reduce its dependence on unreliable sources. Furthermore, strategic international partnerships and a strong focus on recycling and circular economy practices will be critical for India to achieve long-term resilience in the critical minerals sector. Ultimately, securing a robust supply of critical minerals is essential for India to achieve its goals of economic development and national security in the 21st century.
