India’s Rare Earth Crisis: Nuclear Dreams to Industrial Wake-Up 🧲

In 2025, India, despite holding the world’s fifth-largest rare earth reserves, imported 53,748 metric tons of rare earth magnets, with a staggering 93% coming from China.

This US$ 637 million dependency left India just weeks away from an industrial standstill when China weaponised its supply chain, exposing a vulnerability that stunned policymakers and industry leaders alike.

What is happening, why is China behaving this way, and most importantly, what even are rare earth magnets? Let’s start with the simple questions first:

• “Rare earths” are a group of 17 metallic elements found in the Earth’s crust, prized for their unique magnetic, luminescent, and electrochemical properties that are essential in advanced electronics, clean energy, and defence technologies.

• Rare earth magnets, typically made from alloys of neodymium, samarium, or other rare earth elements, are the strongest permanent magnets known and power everything from electric vehicle motors to wind turbines and smartphones.

  
  

Contrary to the name, these are widely abundant. For example, Cerium (used in flat-screen TVs and light bulbs) is available in the world at 68 parts per million (if a water sample contains 5 parts of a pollutant per million parts of water, the concentration is 5 ppm), whereas gold is at 0.005 parts per million! No wonder a gram of Cerium costs about US$ 8 while gold is 14x that!

Yet, due to its wide applicability and difficulty in mining, it’s given the title of “rare”. Yet the question remains - what is the India Inc story with regards to these 17 metals?

Indian Foundation: From Independence to Atomic Dreams

This story began in 1948 when newly independent India, under Dr. Homi Bhabha's visionary leadership, passed the Atomic Energy Act to secure the country's nuclear future.

The act brought monazite - a mineral containing rare earths - under government control, placing an immediate embargo on its export.

Dr. Bhabha envisioned India's 3-stage nuclear program utilising monazite sands of coastal regions, particularly to achieve long-term energy independence. Cut to 1950, Indian Rare Earths Limited (IREL) was incorporated to process monazite for rare earth extraction and thorium production for the atomic power program.

Post the establishment of the Department of Atomic Energy 1963 (and IREL’s induction into it as a Public Sector Undertaking), and other regulatory frameworks, IREL proceeded to become the sole custodian of rare earth mining in the country for 70 years!

The problem? While this system protected the nuclear interests of the country, it failed to treat rare earths as more than a byproduct of its nuclear program and didn’t realise that it is the essence of modern technology + being the sole miner in the nation does more harm than good.

The result? A not-so-friendly neighbour worked in the shadows from the 1980s to now mines 60% of the world’s rare earths and controls 90% of the global processing capacity - China.

Cut to 2025, and much like this year has spelt in general, a crisis event occurred that changed the whole rare earths game.

The 2025 Supply Crisis: When Magnets Became Weapons

On April 4th, 2025, China imposed export restrictions on seven critical rare earth elements - samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium - along with their finished magnets. 

The impact on India was devastating, with automotive production lines grinding to a halt as inventories dwindled to just 2-3 weeks of supply.

India's vulnerability was starkly exposed: the country imported 53,748 metric tons of permanent magnets in FY25, with 93% sourced from China.

The implications?

• Maruti Suzuki was forced to slash its e-Vitara production targets by 67% for April-September 2025, reducing output from 26,512 units to just 8,221 units.

• Bajaj Auto faced even more severe disruption, with Executive Director Rakesh Sharma warning that "supplies and stocks are getting depleted, and if there is no relief and there are no shipments, then July production will get seriously impaired.”

• By end-May 2025, despite 30 Indian import requests receiving government endorsement, none had secured Chinese approval.

  
  

It is barely a competition between India and China. Just take a look at this:

While it might look like all hope is lost, India might be rejigging things to try and break the 7-decade monopoly and get ahead of this mess!

The Policy Awakening: Breaking Seven Decades of Monopoly

The rare earth crisis catalysed dramatic policy reforms that ended IREL's 73-year stranglehold on the sector:

• January 2025 - The government launched the National Critical Mineral Mission with a budget of Rs. 38,000 crore, representing India's most comprehensive effort to achieve rare earth self-reliance. The mission encompasses domestic exploration, overseas acquisitions, recycling infrastructure, and strategic stockpiling, with the Geological Survey of India tasked with conducting 1,200 exploration projects for the next 7 years.

• March 2025 - Vedanta’s Hindustan Zinc secured India’s first private rare earth mining block. This is post the amendment of the Mines and Minerals Act in 2023 to allow private companies to explore and mine rare earth elements.

• June 2025 - The most dramatic policy shift came when the government instructed IREL to suspend its 13-year export agreement with Toyota Tsusho's Indian unit, halting over 1,000 tons of annual rare earth exports to Japan - roughly one-third of IREL's total production.

  
  

Apart from self-conservation and further exploration, India has also seen a breakthrough this month when Hyderabad-based Midwest Advanced Materials (MAM) received Rs. 1,000 crore funding from the Technology Development Board to establish India's first commercial rare earth magnet facility.

This development represents India's first serious attempt at vertical integration in the rare earth value chain, with IREL supplying raw materials to MAM for processing into finished magnets.

The partnership addresses the critical gap that has forced India into an economically disadvantageous position of exporting raw concentrates to Japan for processing, only to reimport finished magnets at premium prices.

The market opportunity is substantial: India's permanent magnet motor market is projected to grow from US$ 3 billion to US$ 8 billion by FY2032, driven by India's EV market surge, with electric vehicle share crossing 4% of total passenger car sales for the first time in May 2025 (up from 2.6% last year)!

The Investment Opportunity

India's rare earth awakening presents multi-layered investment opportunities spanning the entire value chain:

• Vedanta emerges as the primary beneficiary through Hindustan Zinc's acquisition of rare earth, potash, and tungsten mining blocks, positioning the group at the forefront of India's critical minerals revolution with a US$ 20 billion capex commitment.

• The downstream automotive sector represents the largest category of beneficiaries, with companies like Tata Motors (35% EV market share), Mahindra (21%), and,

• Component manufacturers like Sona BLW Precision positioned to benefit from supply chain security and potentially lower input costs.

  
  

The timeline for achieving meaningful self-reliance appears ambitious: while IREL targets scaling neodymium production from current levels to 900 tonnes by 2030, India's magnet demand of approximately 54,000 tonnes annually suggests a massive supply-demand gap that will persist for years.

However, the strategic imperative for diversification has never been stronger, creating a window of opportunity for Indian producers to establish themselves in global markets seeking alternatives to Chinese supply.

The elements are indeed aligned for transformation - whether India can successfully mine, process, and refine them into a lasting competitive advantage will determine not just the country's rare earth future, but its broader aspirations for technological leadership!