India and USA Partnership for Critical Minerals
Context:
Recently, India and the US signed a Memorandum of Understanding (MoU) aimed at strengthening cooperation in critical minerals.
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- This agreement is part of a broader strategy to enhance supply chain resilience and reduce dependency on China, which currently dominates the global market for essential minerals like lithium, cobalt, and nickel.
- It also explored opportunities to boost U.S. investments in India, particularly in the new industrial cities currently being planned.
- The U.S. remains India’s largest trade partner and top export destination.
About the MoU
- Joining the Minerals Security Partnership: In June 2023, India joined the US-led Minerals Security Partnership (MSP), which focuses on developing diverse and sustainable supply chains for critical minerals globally.
- Strategic Focus Areas: The MoU emphasises several key areas:
- Exploration and Extraction: Collaborating on best practices for mineral exploration and extraction.
- Processing and Refining: Enhancing capabilities in processing and refining critical minerals.
- Recycling and Recovery: Promoting recycling initiatives to ensure sustainable use of resources.
India and Australia
In March 2023, India and Australia announced the Critical Minerals Investment Partnership to develop supply chains for critical minerals. The partnership has identified five key projects focused on lithium and cobalt, aiming to facilitate investment and collaboration between the two nations.
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- Importance of Critical Minerals: Critical minerals are essential for various high-tech applications, including:
- Electric Vehicles (EVs): Minerals like lithium and cobalt are crucial for battery production.
- Renewable Energy Technologies: These minerals are also vital for manufacturing components used in solar panels and wind turbines.
- Importance of Critical Minerals: Critical minerals are essential for various high-tech applications, including:
- Implications of the Partnership:
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- Economic Growth: The collaboration is expected to boost bilateral trade, which reached approximately $120 billion in 2023-24.
- Energy Security: As India relies heavily on imports for its critical mineral needs, this partnership will help secure a stable supply chain, reducing vulnerability to external shocks, particularly from China.
- Technological Advancements: The partnership will facilitate technology transfer between the two countries, fostering innovation in mining technologies and sustainable practices.
- Global Leadership: By participating in the MSP and collaborating with other mineral-rich countries, India positions itself as a key player in global mineral supply chains, enhancing its diplomatic leverage on international platforms.
In summary, the India-US partnership in the critical mineral supply chain represents a strategic alliance aimed at enhancing economic resilience, ensuring energy security, and fostering technological innovation while addressing global sustainability challenges.
What Are Critical Minerals?
Critical minerals are defined as those minerals that are crucial for economic development and national security, and whose supply may be vulnerable to disruption. They include both metallic and non-metallic elements that are necessary for various high-tech applications, including: Rare Earth Elements, Lithium, Cobalt, Nickel and Graphite.
Countries often develop their own lists of critical minerals based on their specific industrial needs and strategic assessments of supply risks. For instance, India has identified 30 critical minerals essential for its economic growth, aligning with its goals for clean energy transition and technological advancement .
Importance of Critical Minerals
Economic Development:
- High-Tech Industries: Critical minerals are essential for manufacturing high-tech products such as smartphones, computers, and telecommunications equipment.
- Green Technologies: As the world shifts towards renewable energy sources, critical minerals like lithium, cobalt, and rare earth elements are vital for producing solar panels, wind turbines, and electric vehicles.
National Security:
- Defense Applications: Many critical minerals are used in defence technologies, aerospace applications, and nuclear power systems.
- Supply Chain Resilience: The concentration of critical mineral production in a few countries can lead to vulnerabilities. For example, over 40% of the global processing capacity for lithium and rare earths is concentrated in China.
Technological Advancements: The demand for critical minerals is expected to rise significantly due to the increasing use of advanced technologies in everyday life.
Environmental Considerations: The extraction and processing of critical minerals must be managed sustainably to minimise environmental impact.