As India proceeds with the auctioning of critical mineral blocks, the establishment of battery gigafactories, and its positioning as a reliable alternative in global supply chains, a quieter constraint is becoming increasingly apparent. The nation is trying to construct a manufacturing future on a resource base that is both shallow and insecure.
In an era where global supply chains are fragmenting into geopolitical chokepoints, India’s lag in domestic energy and mineral extraction is surfacing as a structural economic risk—one that cannot be mitigated by tariff protection or industrial branding alone. India’s manufacturing aspirations, encompassing sectors from electronics and electric vehicles to heavy engineering, are fundamentally reliant on the consistent availability of raw materials and energy.
However, this foundation is becoming increasingly worrying. Domestic extraction is stagnating, exploration efforts remain limited, and dependence on imports for critical inputs has surged, coinciding with rival economies securing their own supplies through state-backed industrial strategies. Bridging this gap requires policy reform and Indian firms with scale, balance sheets and execution capability across the resource value chain.
Why energy security matters
In examining the oil sector, it is evident that India’s domestic crude oil production has experienced a prolonged decline. Production levels have decreased from approximately 38 million tonnes in the early 2010s to roughly 30-31 million tonnes in recent years, despite a rise in consumption to 230-240 million tonnes annually. During the fiscal year 2023-24, India imported approximately 232.5 million tonnes of crude oil, resulting in an import dependency exceeding 85 per cent, with provisional estimates suggesting a dependency of nearly 88-89 per cent. Although refining capacity has expanded significantly, upstream production has not kept pace, thereby increasing vulnerability to global price fluctuations, shipping disruptions and exchange-rate shocks. Consequently, India has become the world’s third-largest importer of crude oil, a structural condition that directly contributes to volatility in manufacturing costs.
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Stronger base for critical minerals
The disparity in energy resources is paralleled and, in certain instances, surpassed by deficiencies in mineral security. Official documentation from the Geological Survey of India (GSI) indicates that extensive regions have been identified as possessing Obvious Geological Potential (OGP); however, only a limited portion has undergone systematic reconnaissance and detailed exploration.
In essence, India has completed significantly less than half of the geological groundwork necessary to support sustained industrial growth. In contrast, major mining jurisdictions typically cover 70-90 per cent of prospective terrain before large-scale extraction becomes feasible. This exploration shortfall is particularly critical in minerals that will shape future manufacturing. India imports nearly all of its lithium, remains heavily reliant on foreign sources for nickel and cobalt, and despite holding substantial rare-earth reserves, lacks significant separation and refining capacity.
Trade data reveal a marked increase in imports of lithium compounds and battery-related intermediates since 2021, reflecting rising demand alongside minimal domestic processing capabilities. The vulnerability extends beyond geological factors; it is rooted in the absence of midstream chemical and metallurgical capacity—the segment where most value addition and strategic leverage currently reside. India possesses such capacity already. Large domestic groups, such as the Adani Group, show how scale and integration across mining, logistics, power and ports reduce project risk and speed execution. Consequently, India’s manufacturing strategy is paradoxically reliant on overseas ores and foreign refining hubs, particularly those in East Asia.
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What global experience shows
India’s lag in development can be attributed to structural factors. Historically, public exploration budgets have been limited, exploration agencies have been under-resourced, and private sector involvement has been hindered by complex licensing regulations and fragmented land-use governance. Private-sector mining and processing firms, under regulatory oversight, have driven global exploration, technological upgrading and speed to production. Although there have been marginal improvements in regulatory processes, mining projects continue to experience prolonged gestation periods. Industry assessments and government reviews suggest that the transition from discovery to production can take five to seven years or more, with environmental, forest and land clearances often processed sequentially rather than concurrently.
The comparison with other major economies is revealing. The United States, the European Union, Japan and South Korea now explicitly recognise minerals as strategic industrial inputs. Initiatives such as Washington’s subsidies, offtake commitments and loan guarantees, along with Brussels’ Critical Raw Materials Act, are designed to mitigate early-stage risks and attract private capital.
These interventions should not be misconstrued as protectionism. Rather, they are industrial policy tools aimed at securing manufacturing by ensuring stable and predictable input supplies. What sets these regimes apart is not merely faster approvals, but also state involvement in price risk, long-term demand visibility and offtake assurance.
India has indeed taken some measures in this direction. The auctioning of critical mineral blocks, production-linked incentives for batteries and electronics, and policy statements aimed at enhancing exploration indicate an acknowledgement of the issue. What is lacking is a coherent, time-bound resource strategy that regards mining and processing as national infrastructure rather than a marginal revenue source. Treating mining and processing as national infrastructure also implies partnering with firms operating strategic assets like ports, power and logistics, reducing coordination failures and delays.
A robust strategy would begin with a National Exploration Mission, supported by consistent funding and international technical collaborations, to swiftly enhance geophysical and reconnaissance coverage. Geological data should be made publicly accessible to mitigate information asymmetries and attract private risk capital. Long-dated, stable concession regimes that equitably distribute exploration risk between the state and investors are crucial. A unified digital clearance system with statutory timelines would reduce gestation periods, while conditional social-benefit frameworks and credible rehabilitation guarantees could mitigate local opposition and litigation. If India is to capture a significant share of battery, electronics and clean-energy value chains, fiscal incentives must be oriented toward downstream refining and value addition, rather than merely raw-ore extraction. The political trade-offs are substantial. Mining projects entail visible local costs, environmental concerns, and electoral pressures. However, the alternative—establishing a manufacturing economy reliant on imported energy and ores—entails its own long-term political and economic liabilities. High import dependence exposes India to price fluctuations, export controls and the strategic preferences of distant capitals. Industrial power reliant on imported inputs is not genuine industrial power; it constitutes outsourced vulnerability.
India possesses the prerequisites for transformation: A large domestic market capable of supporting scale, significant geological potential, and a government increasingly adept at industrial strategy. What is lacking is urgency, institutional coherence and a sustained commitment to exploration and processing. If India is earnest about becoming a manufacturing power, it must stop treating mining as a secondary activity. The factories of the future will not operate on slogans or tariffs; they will rely on copper, nickel, lithium, rare earths and reliable energy. Securing these inputs is not an optional policy add-on—it is the foundation of competitiveness.
Bidisha Bhattacharya is an Associate Fellow, Chintan Research Foundation. She tweets @Bidishabh. Views are personal.
(Edited by Theres Sudeep)