Will India Get To Include Critical Minerals in Trade Pact With US?

In October, Piyush Goyal, Commerce and Industry Minister and Gina Raimondo, former US Commerce Secretary signed a memorandum of understanding (MoU) to strengthen the supply chain for critical minerals.

"Negotiations on tariffs are an ongoing process and our government is working to offset tariff responses with purchases from the US - we are big buyers of critical minerals, oil and gas besides military hardware from the Americans," a senior government official told The Secretariat.  

Separately, a newspaper report too indicated that New Delhi is pushing to upgrade the existing MoU into a full-fledged partnership agreement, “aiming to integrate it into broader trade negotiations.” The whole idea is to get concessions on duties for electric vehicles by pointing out that India would be buying critical minerals needed to build EVs from the USA. 

India’s focus on manufacturing growth and its commitment to achieve a stiff target of net zero carbon emissions by 2070 along with an eye on expanding use of electric vehicles, has amplified its need to secure a reliable supply chain for critical minerals and rare earth elements.

A Win-Win Deal For India And The US?

The  Centre for Social Economic Progress (CSEP), a Delhi-based public policy think tank noted India’s growing economy, projected to be the third largest by 2030, aligns with US ‘friendshoring’ strategies to reduce reliance on China. “Shared goals include building resilient supply chains, expanding collaboration in emerging technologies like clean energy, semiconductors, and critical minerals, and tapping into India’s digital and information technology (IT) strengths,” it said.

Washington, currently dependent on critical minerals imports from China, signed an executive order on March 20 to boost production of critical minerals.

The order read, “Our national and economic security are now acutely threatened by our reliance upon hostile foreign powers’ mineral production.  It is imperative for our national security that the United States take immediate action to facilitate domestic mineral production to the maximum possible extent.”   

India's Urgency to Boost Critical Minerals Supplies

Sources told The Secretariat that the Centre is also looking to ink other deals from divergent geographical areas and countries in a bid to secure steady supplies of critical minerals. It is actively looking to increase supplies of these minerals and rare earth elements from Africa, Australia and even South American nations.

“We will look at all possible sources from where we can import,” an official said. In 2023, India identified 30 critical minerals such as lithium, cobalt, gallium, copper, tin, nickel, silicon, phosphorus, potash as essential.

In 2022, the US released a similar list identifying 50 minerals as crucial. The EU has 34 and Australia 26.

US Moves To Enhance Critical Minerals Supplies

Last year, China, which holds complete dominance in the supply chain of critical minerals and rare earth, announced a ban on exports of gallium and germanium to the US. These minerals are key raw materials required to manufacture a host of items including electric vehicles, computer chips and night vision goggles used for military purposes among other things.  

India like many other economies is import dependent for critical minerals despite having a large reserve of these key raw materials. Though the Geological Survey of India identified lithium reserves in Jammu and Kashmir and Rajasthan, officials said it will take a long time to actually mine the area and start producing the new wonder mineral.

“New Delhi therefore needs reliable sources which can supply critical minerals to power its economic activities,” D Dhanuraj, chairman, Centre for Public Policy Research said.