In a major policy push towards industrial self-reliance, the Indian government recently approved a ₹7,280 crore scheme to strengthen the country’s rare earth supply chain. To understand why this matters, we must revisit how India slipped from early leadership to near insignificance.  

A lost advantage 

India holds the third largest ‘rare earth’ reserves globally at 6.9 million tonnes, yet contributes less than 2% to global production. While India produces about 2,900 metric tons of rare earth oxides per year, China produces about 270,000 metric tons. This gap was not created overnight. It grew over decades of missed opportunities.   

India’s early start that never converted 

India, in fact, began early. The Indian Rare Earths Limited (IREL) was set up in 1950, which, ideally, should have created a long-term strategic advantage. Instead, it became a slow, inward-facing monopoly. The IREL focused mainly on nuclear applications. Commercial ambition stayed limited. Processing capabilities stayed basic. Private sector participation was almost absent due to the monopolistic policy framework. Private innovation and R&D remained minimal. While China built thousands of patents and advanced processing facilities, India’s ecosystem stayed narrow.   

Why did India fall behind? 

1. No strong domestic demand base. India’s high-tech and magnet industries did not scale early enough 

1. A monopolized ecosystem kept private investment and new technology out 

1. Low research intensity compared to China’s deep R&D push 

1. Rare earth processing is toxic and complex. India lacked the technology and environmental systems to scale responsibly.  

How China saw the future early 

In the 1970s and 1980s, the United States dominated rare earths. China was barely visible. But China recognized something the world overlooked: that rare earths would become the backbone of future technologies.   

Rare earths were not seen as strategic minerals. Most countries viewed them as niche materials with limited commercial significance. China, however, was closely observing global shifts in electronics, defense, automation and renewable energy. Its scientists and planners realized that future technologies would depend heavily on high-performance magnets, miniaturized components, and specialized materials. Rare earths would sit at the core of all of them. This was the insight the rest of the world missed, and it shaped China’s long-term approach.   

Between 1978 and 1995, China increased production at nearly 40% annually, one of the fastest scale-ups in mineral history. This rapid expansion drove global prices down and caused mines in the United States and Australia to shut down. By the mid-1990s, China had already become the world’s largest producer and the lowest-cost supplier. Most countries stepped back because falling prices made investment unviable, but China continued to expand because it was building long-term strategic capability, not chasing short-term profits. This is where strong government support made the difference. Supportive policies, low costs, and flexible environmental norms helped it scale rapidly.   

Beijing’s greatest advantage  

China’s greatest advantage came from its focus on refining and separation. Rare earth ores have little value without advanced processing, and China invested heavily in this capability while others ignored it. By the 2000s, it controlled 92% of global refining and 69% of global production, dominating the high-strength NdFeB magnet production. It built thousands of patents, developed engineering talent, and created entire industrial clusters dedicated to rare earths. At the same time, the rest of the world treated rare earths as secondary materials and relied on China for cheap supply.   

India remained a raw material exporter, sending out monazite sand and capturing minimal value. Extraction yields at home were low because its deposits contain small quantities of rare earths. Heavy rare earths like dysprosium and terbium are almost absent in India.  

Rises to dominance  

China’s dominance became visible globally only in 2010, when it halted rare earth exports to Japan during a diplomatic dispute. Prices of several elements shot up to more than 2,000%, revealing how much leverage the country had accumulated. By 2025, the consequences of decades of underinvestment became impossible to ignore. China restricted key heavy rare earths and then tightened control over the very machinery needed to process them. Overnight, it became clear that China did not simply dominate supply. It controlled the gatekeepers of the entire chain. The United States depended on China for over 70% of its imports, the European Union for nearly 98% and India for more than 75%.   

One country has become the hinge on which global mobility, energy, electronics and defense now turn. And the world has finally understood the cost of looking away.   

Rahul Gogi is the Head of Growth and Strategy at Recyclekaro, an India-based e-waste and battery recycling company.