Highlights

• China controls 90% of rare earth processing and dominates critical mineral supply chains essential for clean energy technologies.
• India currently depends on Chinese imports for 75% of lithium-ion batteries and lacks domestic manufacturing capacity.
• India is launching Production Linked Incentive (PLI) schemes to boost domestic manufacturing and diversify supply chains.

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The Economic Survey 2024-25 underscores the growing challenge of China’s dominance in global exports and supply chains, particularly in India’s energy transition and critical mineral supply chains. China’s manufacturing overcapacity and $1 trillion trade surplus in 2024 have given it overwhelming control over industries such as renewable energy and electric vehicles (EVs).

Far Behind China

India’s ability to compete remains limited due to its smaller production scale and quality gaps, which force it to continue relying on Chinese imports.

China’s dominance extends to critical mineral supply chains essential for clean energy. It controls 90% of rare earth processing, 60-68% of lithium, cobalt, and nickel, and 80% of battery and solar panel manufacturing. India currently sources 75% of lithium-ion batteries from China and lacks domestic capacity to produce key solar components such as polysilicon, ingots, and wafers. As reported in the Economic Times, this dependence exposes India to supply chain disruptions, price fluctuations, and currency risks (opens in a new tab).

The survey warns that China’s trade surplus and reluctance to boost domestic consumption are exacerbating global market imbalances, making it difficult for India to compete. The reliance on China is particularly concerning for India’s Net Zero 2070 goals, as EV production requires six times more minerals than conventional vehicles. China’s control over these minerals and lack of viable alternative battery technologies further reinforces its position.

India Moves

To counter these risks, India has launched Production Linked Incentive (opens in a new tab) (PLI) schemes to boost domestic manufacturing and aims to diversify supply chains through technology transfer agreements and international partnerships. Increased investment in R&D for alternative battery technologies is seen as a crucial step in reducing dependence on Chinese lithium-ion dominance. However, the survey does not provide details on the effectiveness of these policies or whether concrete international agreements are in place.

Omissions, India Blind spots?

Despite highlighting China’s role in global supply chains, the article does not examine India’s own policy shortcomings, such as slow domestic manufacturing expansion, regulatory barriers, and limited R&D funding. Additionally, it fails to explore how the US, EU, or Japan are tackling similar challenges or whether India is attracting private investment to build local supply chains.

The article reflects a government-aligned perspective, framing China’s dominance as a challenge but not critically assessing India’s preparedness or potential missteps. It also does not consider how China might react if India aggressively diversifies its supply chain, whether through trade restrictions or incentives to maintain control.

Final Thoughts

The risks posed by China’s control over critical resources and exports have become an increasingly serious issue in nations like India. Yet does the world’s fifth-largest economy maintain winning strategies? What is the true possibility of self-sufficiency?

Rare Earth Exchanges will seek analysts, researchers, and journalists who can delve into concrete supply chain diversification efforts, private sector involvement, and geopolitical strategies beyond reducing Chinese imports.