Innovation will determine how effectively countries can reduce external overreliance in an increasingly constrained supply landscape.
Export restrictions and energy transitions have brought critical minerals to the forefront of policy debates. The market value of critical minerals for the energy transition was US$325 billion in 2024 and projected to more than double to US$770 billion by 2040. Their significance is primarily the result of their role in energy systems and strategic technologies. While critical mineral competition is not inherently a zero-sum game, policy choices like the securitisation of resources taking place today can make it seem like one. Countries are actively accelerating efforts for self-sufficiency and chokepoint mitigation through increased mining, processing, and diversified sourcing. However, these supply-side strategies are constrained. New mining projects have lead times of over 17 years, which gives them no short-term or medium-term utility. Moreover, the geographic concentration of mineral reserves means that complete supply security may remain structurally unattainable. In this context, demand-side innovation, such as material substitution, efficiency improvements, and recycling, provides an underappreciated lever for supply chain resilience. Innovating to reduce demand is not a silver bullet, but it has a very important role to play in limiting exposure in a volatile geopolitical landscape.
Countries are actively accelerating efforts for self-sufficiency and chokepoint mitigation through increased mining, processing, and diversified sourcing.
In September 2010, during a dispute over the Senkaku Islands, China halted REE exports to Japan. Japan imported nearly 90 percent of its REEs from China at the time, and despite the ban being short-lived, prices spiked tenfold within a year. The crisis led to concerted action. Japan sanctioned a supplemental budget of US$1.2 billion to protect itself from future disruptions. Along with diversifying with alternative suppliers like Australia, Vietnam and Malaysia, it simultaneously invested in reducing demand for the materials it could not reliably source. Companies like Honda, Toyota, and Daikin pioneered technologies to reduce and reuse rare earth content in their products or substitute it entirely. By 2025, Daido Steel and Proterial (formerly Hitachi Metals) had developed heavy REE-free neodymium magnets for hybrid and EV motors, respectively.
Twenty years into Japan’s multipronged effort, it had managed to reduce imports from China to less than 60 percent. Although its reliance has not been fully eliminated, by managing the level of its dependence, Japanese firms were much better placed to contend with China’s recent critical mineral curbs than the rest of the world.
The rise in solar PV deployment in the last decade was enabled in part by a 40-50 percent reduction in the silver and silicon content of solar cells.
But mineral substitution has a long history. When molybdenum prices increased sixfold in the 1970s, steel makers reduced the molybdenum content in alloyed steels by 25% through more heat treatment. Demand for indium-tin-oxide (ITO) films exploded with the proliferation of flat-panel displays. The rise in price led to manufacturers increasing the efficiency of their processes by 50% by recycling indium that previously was discarded in manufacturing waste. Even though the amount of indium in each product remained the same, less needed to be purchased per product.
The frontier of substitution has since expanded. The rise in solar PV deployment in the last decade was enabled in part by a 40-50 percent reduction in the silver and silicon content of solar cells. In battery chemistry, lithium iron phosphate (LFP) is arguably the most consequential demand-side success story of the decade. It has grown to account for over half of EV batteries and over 90 percent of battery energy storage systems globally, cutting out cobalt, manganese, and nickel. This reduced costs from roughly US$128/kWh for nickel-manganese-cobalt batteries to US$81/kWh. The next step is sodium-ion batteries, one of the few commercially viable battery chemistries that do not rely on lithium. The catch is that manufacturing for both these batteries is dominated by China. But together, these cases demonstrate that when manufacturers have both economic incentive and a policy mandate to innovate, the results can be transformative.
Despite the promise of demand-side innovation, they are not perfect solutions. Recycling and substituting will limit the quantity of supply needed and therefore provide a buffer, but they are not alternatives to upstream activities. Recycling alone cannot fully meet the rapidly increasing demand, and complexities in disassembly and collection can limit the economic viability of formal sector activities.
The central issue with eliminating or reducing a critical raw material will require trade-offs. For instance, technology substitutions that eliminate REEs in EV motors typically have lower energy densities. While prototypes can be promising, there is also a disparity between inventions at laboratory scale and their commercialisation. Iron nitride magnets theoretically have an energy product of 130 MGOe, exceeding neodymium-iron-boron magnets, but commercially available versions deliver only about 10 MGOe. The other concern is that many substitutions trade one critical mineral for another rather than eliminating the problem of scarcity. As a result, the focus needs to be on what solutions are most appropriate for a given application and context.
India’s vulnerability to supply disruptions is driven by its heavy import dependence and limited domestic processing capacity. India is 100 percent import dependent for a third of its critical minerals. This includes germanium, which China introduced export controls on in 2023, and cobalt, which the DRC announced a four-month export suspension to curb falling prices. India’s 2070 net-zero target and push for indigenous manufacturing in technology and defence will require stability in these markets over the coming decades.
India’s vulnerability to supply disruptions is driven by its heavy import dependence and limited domestic processing capacity. India is 100 percent import dependent for a third of its critical minerals.
For some elements, like light rare earth elements (REEs) and graphite, India has significant reserves it can tap into, and for others, it is engaging internationally to access resources. But in both scenarios, China is a chokepoint in midstream refining. In 2024, China accounted for 91 percent of global rare earth element processing, 70 percent of lithium processing, and exported over half of the global supply of graphite. Even if other countries can bridge the processing gap, for certain minerals like heavy REEs, tungsten, and antimony, both reserves and industrial capacity are concentrated in the same country, making the dependence on supply structurally irreducible.
The National Critical Minerals Mission has outlined INR 34,300 crore over seven years to strengthen the domestic value chain. While recycling and beneficiation are mentioned in the policy, major investments and announcements have focused on sourcing, exploration, mining, and processing.
India’s demand-side efforts, albeit nascent and fragmented, are beginning to take shape through innovation in recycling and substitution. Most activity is at the research or early-startup stage, and the policy architecture only began emerging in 2024–25. In September 2025, the Centre approved a ₹1,500 crore Incentive Scheme for promotion of Critical Mineral Recycling, signalling a shift toward circularity.
In the same year, the Battery Waste Management Rules were amended to mandate stricter Extended Producer Responsibility, digital traceability, and higher material recovery targets. Despite the regulatory ambition, India's collection and sorting rate of discarded lithium-ion batteries is 1 percent and the informal sector still handles almost 90 percent of battery waste. Infrastructure is gradually growing and catalysing new models of formal-sector participation and technological processes.
The Battery Waste Management Rules were amended to mandate stricter Extended Producer Responsibility, digital traceability, and higher material recovery targets.
On the substitution side, public and private actors are exploring ways to design around critical dependencies. The Department of Science & Technology has supported research to fabricate improved low-cost heavy rare-earth-free high neodymium-iron-boron magnets. Automobile companies such as Ola and MATTER are advancing rare-earth-free ferrite-based magnets for the switch to more abundantly available materials. Sodium-ion battery research is the most developed cluster of demand-side activity in India, with national-level industry-academia exchanges at IIT Bombay, upgrades in charging, and the first commercial rollout by Naxion Energy. However, the commercial scale is very nascent. These efforts indicate some recognition of the problem but also highlight the absence of a coherent strategy to translate individual efforts into systemic impact.
India’s limited emphasis on reducing material intensity needs to be bridged by an industrial policy. First, the use of standards and procurement. Unlike the EU, India does not have standards for procurement or mineral-intensity performance. Existing Production Linked Incentive schemes reward scale but not efficiency in material use. Introducing procurement preferences for products that use fewer critical minerals per unit could create a strong signal for innovation.
Second, targeted funding for substitution. While existing instruments such as the ANRF RDI Fund and Centres of Excellence under the National Critical Minerals Mission could support this, there is currently no dedicated programme focused on substitution technologies. A clearly defined funding stream would help create momentum in research.
Third, India needs an institutionalised industry-academia bridge. Similar to Japan’s JOGMEC-led model, India needs to systematically translate research into industrial adoption. Anchor institutions linked directly with OEMs and manufacturers could help close this gap.
Fourth, the recycling policy must crack down on enforcement. Weak enforcement is the biggest hurdle in India to making recycling a meaningful contributor to supply resilience.
Targeted funding for substitution. While existing instruments such as the ANRF RDI Fund and Centres of Excellence under the National Critical Minerals Mission could support this, there is currently no dedicated programme focused on substitution technologies.
Finally, India must identify its areas of advantage. India’s EV market is dominated by two and three-wheelers. This environment, where cost considerations are more important than energy density, is ideal for sodium-ion batteries. This creates an opportunity for India to sandbox and shape a battery ecosystem aligned with its domestic needs, while reducing exposure to mineral constraints.
The objective of mineral security cannot be complete independence. That is neither feasible nor necessary. The goal is resilience, for India’s economic as well as environmental ambitions. So, where supply cannot be controlled, finding new ways to manage demand becomes essential to reducing exposure and retaining the ability to negotiate and absorb shocks. India’s mineral security will depend as much on reducing demand as securing supply.
Amoha Basrur is a Junior Fellow with the Centre for Security, Strategy, and Technology at the Observer Research Foundation.
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Amoha Basrur is a Junior Fellow at ORF’s Centre for Security Strategy and Technology. Her research focuses on the national security implications of technology, specifically on ...
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