Economic Survey 2025-26 Urges National Critical Minerals Policy to Counter China Dependence
The Economic Survey 2025-26 has made a compelling case for a comprehensive national policy focused on critical minerals and rare earth elements (REEs). This strategic recommendation aims to significantly reduce India's import dependence, particularly from China, which currently supplies approximately 60-80% of the country's rare earth needs.
From Survey to Budget: The Rare Earth Corridors Initiative
The survey's findings provided the strategic foundation for the specific "Rare Earth Corridors" proposal featured in the Union Budget 2026-27. This progression from policy recommendation to budgetary action underscores the crucial role of government intervention in driving major industrial transformations. India possesses among the largest rare earth reserves globally, yet remains dependent on imports for nearly all its lithium, cobalt, and nickel requirements.
The Global Shift Toward Strategic Industrial Policy
This policy push arrives at a pivotal moment as the world fragments into competing economic blocs, with nations racing to secure strategic industries within their borders. From semiconductor subsidies in the United States to the European Union's green technology initiatives, governments worldwide are increasingly abandoning free-market orthodoxy despite numerous free trade agreements.
The fundamental question has evolved from whether states should intervene to how strategically they can do so. Markets do not exist in isolation; they are shaped by the risks governments are willing to undertake and the barriers they are prepared to dismantle.
Historical Precedents of Government-Led Innovation
The internet itself emerged from funding by the Defense Advanced Research Projects Agency (DARPA), a U.S. Department of Defense agency that funds high-risk, high-reward research to create revolutionary technologies for national security. Similarly, China's solar panel dominance—accounting for over 80% of global manufacturing capacity—stems from massive state support. In both instances, governments acted as investors of first resort, establishing foundations upon which private sectors could build.
India's Own Success Stories of Policy-Driven Growth
India's economic transformation follows this same pattern across multiple sectors:
- Information Technology: The Software Technology Parks scheme of 1991, offering tax exemptions on software export profits alongside infrastructural improvements, turbocharged India's IT services sector from approximately $110 million in exports in 1990 to nearly $240 billion by 2024. Companies like TCS, Infosys, Wipro, and HCLTech benefited not only from talented engineers but from tax holidays that made Indian IT services globally competitive.
- Telecommunications: The National Telecom Policy of 1999, which shifted from fixed licence fees to revenue-sharing, dramatically reduced entry barriers. Teledensity soared from less than 1% in 1992 to nearly 86% today, creating the world's second-largest telecom market and spawning an extensive ecosystem of service providers, tower firms, handset manufacturers, and app developers.
- Pharmaceuticals: The Patent Act of 1970 provides perhaps the most striking example. By denying product patents for pharmaceuticals and granting only process patents, it became the foundation for India's $50-billion pharmaceutical industry. This policy prioritized indigenous learning over global rent-seeking, allowing Indian firms to reverse-engineer drugs and produce them at scale. Today, India supplies 40% of generic drugs consumed by Americans, with companies like Sun Pharma, Cipla, Dr. Reddy's, and Lupin becoming household names.
Geopolitical Imperatives and Supply Chain Realities
The geopolitical landscape has intensified these imperatives. China has weaponized its dominance over critical minerals, imposing export restrictions on gallium, germanium, and rare earth elements in response to Western technology controls. Political pressure through tariffs, combined with supply chain vulnerabilities exposed by recent crises, is driving a transition from global to regional supply chains.
Companies worldwide are reshoring production, investing billions to shift manufacturing closer to home. In this new landscape, countries that move first and boldly—securing critical supply chains and building domestic capacity—will hold decisive advantages.
Lessons for India's Future Industrial Strategy
There are clear lessons for India as it eyes emerging sectors like green energy and electric vehicles. The government isn't merely a regulator or referee—it is a catalyst that determines which industries take root and which remain nascent. Strategic policy intervention at key inflection points creates decades of compounding advantage.
The lesson of the last fifty years is clear, but the urgency of the next decade is even more pronounced. Innovation doesn't just happen spontaneously; it must be nurtured through visionary policy frameworks. Successful entrepreneurs operate on tracks that forward-looking policy has already established.
As the world reorganizes into competing economic spheres, countries that hesitate to deploy strategic industrial policy will find themselves dependent on rivals for the technologies defining the 21st century. The Economic Survey's focus, and by extension the Budget's emphasis, on critical minerals isn't just about reducing import bills—it's about securing India's place in a world where economic sovereignty and national security have become inseparable.
