By Zarak Khan | 2025-10-20

Confronted with China's efforts to dominate global rare earth supply chains, India is moving assertively to reduce its dependence on Beijing's strategic leverage.

Rare earths are essential for making high-performance magnets in a slew of vital industries like car-making, electronics and defense. China is the world's leading producer of rare earths.

Two key initiatives, a nascent National Critical Mineral Stockpile (NCMS), and the National Critical Minerals Mission (NCMM), form the centerpiece of New Delhi's strategy to insulate itself from supply shocks and reclaim autonomy in critical technology supply lines.

India's policy shift reflects its growing urgency in securing critical mineral supplies.

"We are looking to create a two-month stockpile of rare earth elements under the program, with a focus on private player participation," a senior government official told Economic Times on condition of anonymity, referring to the NCMS. "The initial focus is on rare earth elements."

India might stockpile other critical substances later, the same official said.

The NCMM is another effort by New Delhi to counteract China.

Approved in January, it carries a budgetary allocation of 163 billion INR (about $1.9 billion) over seven years and is designed to support "all stages of the [rare earth] value chain, including mineral exploration, mining, beneficiation, processing and recovery from end-of-life products," according to an Indian government statement.

Beijing's choke hold on rare earths

China has not been reluctant to remind everyone of its dominant position in rare earth element production.

Since April, Beijing has tightened control over several rare earth materials, requiring export licenses for select products and technologies. That move has disrupted global manufacturing supply chains and unsettled markets dependent on Chinese inputs.

On October 9, China's Commerce Ministry announced new licensing requirements for rare-earth-related technologies, including for overseas entities, citing "safeguarding national security and interests."

At the same time, China intends to add five more elements, including holmium, erbium, thulium, europium and ytterbium, to its licensing regime.

Analysts view the twin moves as part of Beijing's broader strategy to weaponize its industrial dominance.

The latest restrictions refocus "attention on how China uses its influence as the world's biggest trading nation and its dominance of manufacturing supply chains to project power in international affairs," wrote James Kynge, a Sinologist at the British think tank Chatham House, in an October 10 analysis.

"China's willingness to use its trade heft to advance geopolitical goals should make policymakers in the West wake up to the growing power of its manufacturing supply chain and its control over certain so-called 'chokepoint' technologies, which it can restrict at will," he added.

India's strategic partnerships

New Delhi's initiatives reflect India's acknowledgment of its "extreme dependence on China" and its push to strengthen domestic production while forging new international partnerships.

Analysts and think tanks are urging New Delhi to deepen coordination with like-minded countries.

The Institute for Energy Economics and Financial Analysis, a think tank based in Ohio, in June urged India to work with the United States, Japan and Australia on exploring "joint ventures, shared reserves and diplomatic agreements that enhance mineral security."

It further recommended that New Delhi secure "access to allied reserves or develop shared stockpiles through multilateral platforms such as the Quadrilateral Security Dialogue, the Minerals Security Partnership and the Indo-Pacific Economic Framework for Prosperity."

Following government directives, IREL (India) Ltd., a state-owned mining enterprise, is "exploring rare earth resources in Oman, Vietnam, Sri Lanka and Bangladesh," while expanding cooperation with Washington through "a strategic partnership to minimize" dependence on China, the Times of India reported in July.

India is already in trade talks with Chile and Peru to secure access to critical mining resources, Reuters reported in July.

At the same time, global demand dynamics may play to India's advantage. As China's curbs unsettle supply chains, Western governments and firms are scrambling to diversify.

The European Union, for instance, is seeking closer coordination with the United States and other G7 countries to counter China's export clampdowns.

Tokyo has also voiced alarm over Beijing's escalating export curbs.

"Japan is deeply concerned about the extensive export restrictions on rare earths announced by China last week, and the G7 should unite in dealing with the issue," Japanese Finance Minister Katsunobu Kato told reporters on the sidelines of the International Monetary Fund and World Bank fall meetings in Washington October 16.