China’s sweeping export restrictions on rare earth magnets have triggered a global supply chain crisis, exposing the vulnerability of industries from electric vehicles to defense. For India, which relies heavily on Chinese imports for these critical materials, the move has served as a wake-up call. In response, India is accelerating a bold strategy to build a resilient, self-reliant rare earth ecosystem—ramping up domestic production, forging international partnerships, and offering new incentives to industry. As the world seeks alternatives to China’s near-monopoly, India’s rare earth corridor is emerging as a pivotal solution for both national security and global supply chain stability

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Rare earth metals have become the latest flashpoint in global trade and technology. In April 2025, China, controlling about 60% of global rare earth mining and nearly 90% of refining—imposed sweeping export restrictions on rare earth magnets and key elements, sending shockwaves through supply chains worldwide. India, heavily reliant on these imports for its electric vehicles, electronics, wind turbines, and defense sectors, has responded with an ambitious, multi-pronged strategy to secure its future.

China’s sweeping export restrictions on rare earth magnets have triggered a global supply chain crisis, exposing the vulnerability of industries from electric vehicles to defense.

China’s Rare Earth Leverage

China’s dominance in the rare earth sector is both economic and strategic. With state-backed subsidies and advanced processing capabilities, China produces over 60% of the world’s rare earth elements and refines more than 90% of global output. In April 2025, Beijing enacted export controls on seven critical rare earth elements and magnets, requiring exporters to obtain licenses for each shipment—procedures that are slow, opaque, and inconsistent across provinces. These measures were a direct response to escalating trade tensions and new tariffs imposed by the United States.

By the early 2000s, China produced up to 97% of global rare earths. This dominance was achieved as Western nations shut down their own mines over cost and environmental concerns, while China invested heavily and perfected extraction and processing method.

The impact is profound: global automakers, defense giants, and electronics manufacturers have warned of production delays and shutdowns, while some European auto plants have already halted operations due to supply shortages. China’s leverage extends beyond economics; by requiring end-user disclosures in export applications, Beijing gains deeper insight into global industrial ecosystems, further strengthening its strategic position. Even countries with significant rare earth reserves, like Australia, remain dependent on China for refining and processing.

Effects on Key Sectors

China’s export curbs have exposed vulnerabilities across India’s high-growth industries:

• Automotive: The EV sector, especially two-wheelers, faces acute shortages, with only about a month’s worth of rare earth magnet inventory left. Major manufacturers warn of production halts and price hikes if supplies remain disrupted.

• Defense: Rare earths like neodymium, dysprosium, and samarium are critical for missiles, radar, and advanced weaponry. The restrictions have heightened concerns about national security and the resilience of India’s defense supply chain.

• Electronics and Clean Energy: Smartphones, wind turbines, and green technologies depend on rare earth magnets. Disruptions threaten to slow India’s clean energy transition and digital infrastructure growth.

Global ripple effects

The immediate fallout has been acute. Automakers in Europe, the US, and Japan have warned of rising costs and production slowdowns. Defense industries, reliant on rare earth magnets for advanced weaponry, face strategic vulnerabilities. Even as China has begun to issue some new export licenses, the process remains slow and supplies scarce, keeping global manufacturers on edge.

These disruptions have reignited calls for supply chain diversification. The US and EU are investing in alternative sources and recycling technologies, but the path to self-sufficiency is long and fraught with technical and environmental challenges

Key developments in India’s rare earth corridor

With the world’s third-largest rare earth reserves, India has long been seen as an underutilized player. That is changing rapidly in 2025. India’s strategy to break free from Chinese dominance is comprehensive:

1. Domestic Production Push : India is operationalizing its first major oxide-to-magnet plant in Hyderabad, set to produce 500 tonnes per year initially and scale up to 5,000 tonnes by 2030. Backed by government funding and India Rare Earths Ltd (IREL), the plant is expected to start production within six months. The government has also launched the National Critical Mineral Mission and is finalizing a ₹3,000 crore incentive scheme to boost domestic magnet manufacturing.

2. Resource Exploration and Development: The Geological Survey of India (GSI) has launched 195 exploration projects in 2024-25, including 35 in Rajasthan, to identify and fast-track new rare earth resources. New discoveries are being prioritized for commercial mining.

3. International Partnerships : India is building strategic alliances with Central Asian countries and exploring supply arrangements with Vietnam, the US, and others to secure alternative raw materials and reduce vulnerability to geopolitical shocks.

4. Policy and Industry Measures: The government is promoting private sector participation, R&D, and commercialization of magnet-making technologies. Production-linked incentives and subsidies are being considered to bridge the price gap with cheaper Chinese imports. While temporary arrangements to resume some imports from China are being discussed, the long-term focus is on building a resilient, self-reliant supply chain.

Table: India’s Rare Earth Corridor Initiatives (Source: Media Reports)

Challenges and the road ahead

Despite holding the world’s third-largest rare earth reserves (about 6.9 million tonnes), India’s production capacity remains limited, ranking seventh globally, far behind China. Most domestic output has historically been allocated to atomic energy and defense, leaving other industries dependent on imports. The viability of Indian manufacturing is challenged by China’s aggressive price cuts, which saw India’s import value rise only 12% despite a 95% increase in quantity in FY25.

Building a robust rare earth ecosystem will require:

• Sustained investment in mining and processing infrastructure
• Technological innovation and commercialization of new magnet-making methods
• Close cooperation between government, industry, and international partners

China’s rare earth leverage has exposed the fragility of global supply chains and the risks of over-reliance on a single supplier. India’s rare earth corridor represents a decisive strategic response, combining immediate contingency measures, policy incentives, domestic capacity building, and international partnerships. The coming years will be crucial in determining whether these efforts can rebalance the global rare earth market and secure the future of India’s critical industries.