Deal to Secure Critical Minerals

India and Russia are nearing a preliminary agreement on critical minerals, a partnership aimed at diversifying supply chains and reducing reliance on China. While the deal addresses India's urgent need for materials like lithium and rare earths for its energy transition, it faces significant execution challenges. These stem from India's mixed record in securing overseas assets and the complex geopolitical landscape involving Russia.

Why India Needs Critical Minerals

India urgently needs stable supplies of critical minerals such as lithium and rare earth elements. These materials are vital for its growing electric vehicle (EV) manufacturing sector and renewable energy infrastructure. Demand for these minerals is expected to rise sharply by 2030. China currently dominates global supply chains, controlling over 69% of rare earth production and significant portions of lithium processing. This dominance creates vulnerabilities for India, driving it to seek partnerships. Russia, which holds substantial mineral reserves, is a key partner in this strategy. The proposed agreement would leverage Russia's resources for exploration and processing, with government backing for corporate investments, but Russia's ongoing geopolitical issues add complexity.

India's Global Mineral Strategy

Securing critical mineral supplies is a key goal for India, but translating diplomatic efforts into actual projects has been slow. As of May 2026, India has secured only one operational project: a lithium exploration agreement in Argentina signed in 2024. Global competitors have more integrated strategies. China built its processing capacity over decades with state support. The U.S. and the EU are focusing on domestic production, R&D, and alliances. For example, the EU's Critical Raw Materials Act sets targets for domestic extraction, processing, and recycling. While India's mining sector has grown significantly, with its Metals and Mining industry up 41% in the past year and forecast earnings growth of 26% annually, this broad performance doesn't solve the specific challenge of securing overseas mineral assets. The Indian Metals and Mining industry currently trades at an average forward P/E of 19x.

Key Risks for the India-Russia Pact

Despite the strategic motives, the India-Russia pact faces significant obstacles. India's past performance in turning agreements into working resource projects is a concern, with its portfolio yielding only one lithium venture in Argentina. Relying on Russia, which is under extensive sanctions, introduces supply chain and payment risks, although some analyses suggest sanctions have had limited impact on its non-oil exports. Furthermore, a proposed lithium exploration project in Mali depends on stable political conditions, and India previously withdrew from similar situations. China's long-established dominance in critical mineral processing remains a major hurdle that India aims to work around, rather than replicate immediately. Turning complex deals into practical operations is a persistent challenge, and this pact risks becoming another agreement on paper without the necessary on-ground execution to effectively reduce India's supply chain weaknesses.

Outlook for Critical Minerals

Demand for critical minerals is expected to rise sharply, fueled by the global energy transition, AI development, and defense needs. Analysts anticipate persistent lithium shortages through 2030, with demand expected to double and energy storage applications growing rapidly. Major banks note that the era of chronic lithium oversupply is over. India's mining sector is expected to continue growing, with forecasts of an 8% annual expansion. However, the success of initiatives like the India-Russia pact hinges on New Delhi's ability to navigate complex partnerships and turn diplomatic intentions into stable, working supply chains, a critical test for its self-reliance goals.