Green transition and Artificial Intelligence (AI) waves are shaking the global economy like never before. At the epicentre of both these tsunamis are critical minerals, including minerals such as copper, lithium, cobalt, and rare earths. Their utility is ubiquitous — from consumer goods to defence equipment, clean energy, and advanced aerospace systems, among others. The supply-side levers of critical minerals, especially for refining and further processing, presently vest with a few nations, which are not always aligned with India’s interests. According to the International Energy Agency, China accounted for approximately 60 per cent of global rare earth mining output and 91 per cent of global production in the separation and refining stages in 2024.

As the global demand for critical minerals is expected to surge, primarily driven by clean energy and Artificial Intelligence/Machine Learning, India is racing against time, as other nations vie for the same resources. Critical minerals require substantial policy support and international cooperation to mitigate economic and energy security risks.

For India, achieving rapid and equitable growth, along with its net-zero ambitions, entails securing its supply chain of critical minerals. The Economic Survey 2025-26 highlighted the importance of critical minerals in India’s green energy transition and industrial security.

Like China, India must invest vigorously in building infrastructure that supports the mining and processing of critical minerals. India is endowed with the world’s fifth-largest reserves of rare earth elements, approximately 163.9 million tonnes of copper, and 44.9 million tonnes of cobalt ore reserves. These dormant reserves can be strategically leveraged by establishing an indigenous and integrated value chain.

While the country has demonstrated capabilities throughout the value chain at pilot scales in critical minerals, the near absence of commercially competitive large-scale downstream processing capacities is a crucial gap yet to be bridged.

The National Critical Mineral Mission (NCMM) 2025, with a target outlay of ₹34,000 crore ($3.8 billion) over seven years, is a welcome step. However, this is paltry compared to the requirements. In contrast, China invested $21.44 billion in critical minerals in 2024 alone. Although India can’t match China’s investment size, it can cleverly allocate its limited financial resources to attract private capital.

The 2026-27 Budget announcement of setting up rare-earth corridors, a subset of critical minerals, across the value chain, can strengthen India’s critical mineral supply chain. Besides, the announcement of an exemption from Basic Customs Duty (BCD) on the import of capital goods used for the processing of critical minerals can support companies considering investing in refining and processing critical minerals, which are key to India’s green manufacturing ambition.

Financial interventions

The exploration, mining, and refining of critical minerals are associated with high lead times, large-scale capital requirements, and extensive due diligence, while also being exposed to various uncertainties. The government can support the private sector in several ways, such as providing concessional and long-term loans, initial funding for refinery construction, and production tax credits.

As critical mineral prices and demand are volatile, the government can support revenue stabilisation, such as contracts for difference (CfD), which provide a guaranteed price over a set period, and demand guarantees, to entice investors. The government’s incentives, which can be tied to high environmental and social standards, could help unlock new supply. These incentives and risk mitigation instruments can put private investors in a comfortable position.

Technology plays a crucial role in the development of exploration, mining and refining. Artificial intelligence-driven geological analysis can significantly reduce drilling costs while increasing discovery success rates by more than three times.

Co-development of technology through public funding and financial incentives for innovation in the critical minerals supply chain can attract early-stage investors, mining corporations, and companies in the electronics, energy, and automotive sectors looking to hedge raw materials risks.

Local communities

Critical minerals mining and processing are often associated with social unrest in local communities, as the latter are exposed to environmental hazards such as polluted water, land, and air. The government can also encourage the local community to become co-investors in a mining/processing project.

The public sector or a department within the Government can create a financial facility, managed by professionals, that provides capital in the form of debt or equity to local critical mining facilities. Over time, as the principal and interest or dividend components are serviced by the projects, they can be used exclusively for the development of local projects. Such a facility can ensure local community buy-ins and faster execution of projects.

Moving minerals seamlessly

The world is expected to remain in the realm of geopolitical transnationalism and supply-chain uncertainty for the foreseeable future. The government can support public sector undertakings and private firms in acquiring and developing critical mineral assets globally, while being sensitive to local aspirations. The Khanij Bidesh India Ltd. (KABIL) has established partnerships with the Critical Minerals Office (Australia), CAMYEN (an Argentine state-owned enterprise), and ENAMI (a Chilean state-owned mining company) to diversify supply chains for battery materials, helping India secure its critical mineral supply chain.

Labanya Prakash Jena is Director, Climate and Sustainability Initiative, and Visiting Senior Fellow, London School of Economics and Political Science; Prasad Ashok Thakur is an alumnus of IIT Bombay and IIM Ahmedabad, and Trlochan Tripathy is a Professor of Finance at XLRI, Jamshedpur. Views expressed are personal. 

Photo Credit: WASHINGTON ALVES