India's ₹7280 Crore Rare Earth Push: Late Awakening

The Indian government has announced a Rs 7280 crore scheme to make India self-reliant in manufacturing rare earth permanent magnets (REPMs), which are crucial components for high-end sectors. As the government press release states, 'REPMs are one of the strongest types of permanent magnets and are vital for electric vehicles, renewable energy, electronics, aerospace, and defence applications. The Scheme will support the creation of integrated REPM manufacturing facilities, involving conversion of rare earth oxides to metals, metals to alloys, and alloys to finished REPMs.'

And yet, this might be too little, too late for reasons that have to do with more than just commerce. China controls nearly all the supply of REMPs, and as Donald Trump went on a tariff war with the world, China simply turned off the tap. It was great leverage for standing up to the United States. But it made every country realise just how vulnerable they were to China when it came to their own industries. As a consequence, many of them, like India, are hurrying up to get over this dependency.

And it will take years for that to happen. The Indian scheme, which incentivises companies to do the manufacturing, envisages seven years. By then, there will be others also who will be rolling it out, including the US. That would turn REPMs into something like oil today, where no one country or bloc can hold the world to ransom as OPEC once could.

In addition, technology might make REPMs increasingly less important. An article in The Economist some months back spoke of how researchers are already coming up with alternatives that use traditional minerals to create the same functions. Eventually, it will be made at scale.

The time to come up with such a scheme for India was a few decades ago anticipating how REPMs would define electronics. That is the advantage of foresight. The thing to do now is to invest enormous capital in the alternatives to REPMs that are on the horizon, instead of being rooted to a past that is already changing.