When it comes to trade, the global narrative often revolves around the benefits of globalization—open markets, seamless exchange of goods, and shared prosperity. However, when the topic shifts to critical minerals, the conversation turns more toward national security and self-preservation. Nations are now racing to secure these vital resources through a complex web of policies and alliances, recognizing that critical minerals are the new lifeblood of the 21st-century economy.
To put this into perspective, the World Bank estimates that by 2050, the production of minerals such as graphite, lithium, and cobalt will need to increase by nearly 500% to meet the growing demand for clean energy technologies. Simultaneously, the International Energy Agency (IEA) predicts that the surge in electric vehicles and battery storage will drive up the demand for these minerals at least 30 times by 2040.
But it's not just about clean energy—critical minerals are also the backbone of the semiconductor industry. As India pushes to become a global hub for semiconductor manufacturing—a sector expected to reach $1 trillion globally by 2030—the need for a stable supply of critical minerals becomes even more urgent. Semiconductors, the tiny chips that power everything from smartphones to electric vehicles, rely heavily on materials like silicon, cobalt, and rare earth elements, in addition to access to technology. Without a secure supply of these minerals, India’s dream of becoming a key player in the global chip industry could be at risk.
India, the world’s fifth-largest economy, has set its sights on reducing its carbon footprint and becoming a leader in high-tech manufacturing. The 2023-24 Economic Survey highlighted India’s critical mineral dependence on China as a significant concern, urging the government to address the challenges posed by this reliance. The stakes are enormous—will India be able to secure these vital resources and realize its high-tech aspirations, or will it fall behind in the global race? The answer lies in our policies, partnerships, and innovations. India’s mission needs to be more than just a declaration of intent—it needs to be a strategic, comprehensive plan that propels the country to the forefront of the global critical minerals race.
What Are Critical Minerals?
Critical minerals are vital for economic and national security, yet their supply chains are often fragile. Countries like the US, EU, and Japan have already defined lists of critical minerals tailored to their strategic needs—such as lithium, cobalt, and rare earth elements. In response, India has established a committee to identify minerals crucial for economic development, resulting in a list of 30 critical minerals. However, we are yet to have a comprehensive list specific to our economic and national security priorities formally adopted by the government. As global competition for these essential materials grows, India must swiftly formalize and prioritize its critical minerals to secure the resources necessary to support its burgeoning technology and clean energy sectors.
Bridging the Policy Gaps: What to Do Next?
India’s National Mission on Critical Minerals is a vital step forward, but several critical policy gaps must be addressed to ensure its success. First, India must introduce comprehensive tax incentives akin to those in Australia and Canada. For instance, the Australian Government's Critical Minerals Production Tax Incentive (CMPTI) is a $7 billion program supporting the processing and refining of critical minerals in Australia and will be available from 2027–2040. It provides eligible entities with a 10% refundable tax offset for eligible expenses incurred in processing and refining 31 specific critical minerals. By offering similar tax incentives, India could attract substantial investment in its critical minerals sector, which is crucial as it currently imports over 80% of its critical minerals.
Foreign Direct Investment (FDI) regulations are another area requiring urgent attention. Nations like Chile and Australia have designed FDI policies that draw foreign capital and enable the transfer of advanced extraction technologies. For example, Chile’s FDI inflows reached $257 billion in 2022, with a significant portion directed towards mining and processing technology-intensive projects. India, in contrast, needs to update its FDI policies to facilitate such technology transfers and partnerships, which are essential for scaling up domestic mining, processing, and refining capabilities.
Establishing a strategic stockpile of critical minerals, similar to Japan’s model, is another crucial measure. Japan’s Resource Diplomacy Guideline and strategic stockpile have ensured a steady supply of critical minerals, even amid global market fluctuations, with reserves covering up to 60 days of domestic demand. India, however, lacks such a buffer, making its economy vulnerable to supply chain disruptions. India can better protect its critical mineral supplies by developing a strategic reserve and securing long-term contracts with reliable suppliers.
Innovation and sustainability are equally important. The European Union, through programs like Horizon 2020, has allocated over €1 billion towards research in sustainable mining practices and alternative materials, driving significant advancements in the field. India must follow suit by establishing a dedicated fund for sustainable mining technologies and enforcing stricter environmental regulations. India’s environmental oversight in mining is considered less rigorous, which could undermine the long-term sustainability of its mineral extraction efforts.
International collaboration is another area in which India needs to strengthen its approach. Countries like the United States and Australia have forged bilateral agreements with resource-rich nations to secure mutual access to critical minerals, enhancing their supply chain security. India joined the U.S.-led Mineral Security Partnership (MSP) as its 14th member in June 2023, signaling its commitment to international cooperation. Despite these efforts, challenges remain. India must actively pursue similar agreements, particularly with countries in Africa and South America, to diversify its supply sources and reduce dependence on a single nation.
Finally, India should develop a National Plan for Circular Economy and a Technology Roadmap for Solid Waste Recycling, drawing inspiration from leaders like Belgium and Japan. These countries have successfully integrated recycling into their critical minerals strategies, reducing their reliance on virgin materials. For example, Belgium’s circular economy initiatives have led to a 25% reduction in primary material use over the past decade. India, too, has made strides in this area, but a more comprehensive national plan is needed. This plan should set clear targets for recycling critical minerals and incentivize companies to invest in recycling technologies. Additionally, a technology roadmap would provide the industry with a clear direction, aligning public and private sector efforts toward sustainable resource management.
Moving the National Critical Minerals Mission Forward
India’s National Mission on Critical Minerals is a step in the right direction. Still, it must be coupled with swift and decisive action, given the pace with which we have been challenged by growth aspirations and the side effects of delaying net zero goals and climate change. The government must craft a comprehensive policy incorporating global leaders' best practices in critical mineral management. This includes creating a favourable investment climate, fostering international partnerships, promoting innovation, and ensuring environmental sustainability.
The stakes are high. Critical minerals are the bedrock of modern technology and the key to achieving India’s climate goals. India cannot afford to lag as the world races to secure these vital resources. India can lead the global transition to a sustainable, low-carbon future by implementing a forward-thinking, strategic approach.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
