India–Germany relations received a decisive boost following German Chancellor Friedrich Merz’s visit to India, his first trip to Asia since assuming office. Beyond defence and economic cooperation, the standout outcome was the Joint Declaration of Intent on Cooperation in the Field of Critical Minerals — a signal that the partnership is increasingly shaped by supply-chain geopolitics and energy transition imperatives rather than trade alone.
Why critical minerals have moved to the centre
Critical minerals, particularly rare earth elements, are indispensable to modern economies. They are essential for producing rare-earth permanent magnets used in electric vehicles, wind turbines, semiconductors, aerospace, and defence systems. Of the 30 critical minerals identified by India, many are directly linked to rare earth value chains.
China’s dominance in this sector has created strategic vulnerabilities. India imported over 90% of its permanent rare-earth magnets from China in 2025. This dependence has already translated into economic risk, as seen when China curtailed rare earth supplies during its trade dispute with the United States, affecting India’s automobile sector.
Germany faces a similar challenge. Its advanced manufacturing base and renewable energy ambitions — especially offshore wind — are heavily dependent on Chinese-supplied magnets. This shared vulnerability explains the strategic logic behind Indo-German cooperation on critical minerals.
A geopolitical, not just economic, convergence
The Joint Declaration reflects a broader shift in how India and Germany view economic security. Rather than treating supply chains as purely commercial, both sides now see them as strategic assets that must be diversified and made resilient.
The declaration envisages cooperation across exploration, research and development, processing, recycling, and joint ventures — not only bilaterally but also in third countries. Importantly, this framework aligns with defence co-production, green hydrogen initiatives under the Green and Sustainable Development Partnership, and semiconductor collaboration, embedding minerals into a wider strategic ecosystem.
India’s push to build a domestic rare earth base
India has begun laying the policy foundations to reduce its dependence on imported rare-earth value chains. In January 2025, it launched the National Critical Mineral Mission, a $4-billion programme running until 2031 aimed at securing supply chains across mining, processing, and manufacturing.
This was followed by Cabinet approval of ₹7,280 crore in November 2025 to promote the manufacturing of sintered rare-earth permanent magnets. The Union Budget 2026–27 further announced a dedicated rare earth corridor, signalling intent to integrate mining, processing, research, and downstream manufacturing.
These steps are strategically timed, as Europe is simultaneously reassessing its reliance on China.
Germany and Europe’s search for alternatives
Germany’s Federal Ministry for Economic Affairs and Climate Action, along with the European wind industry, released the “Resilience Roadmap for Permanent Magnets” in August 2025. The document highlighted that over 90% of permanent magnets used in wind turbines were sourced from China and set a target to source over 30% from outside China by 2030.
For Germany, diversification is not optional. Offshore wind — central to its decarbonisation strategy — is magnet-intensive, making supply security a national priority. This creates space for India as a potential long-term partner, provided it can deliver reliable output at competitive costs.
India’s resource paradox
India is believed to hold the world’s third-largest rare earth deposits, primarily in coastal monazite sands and some hard rock formations. Yet its share in global rare earth output remains below 1%.
The challenge lies in the nature of these reserves. Much of India’s rare earth potential is classified as “inferred”, lacking detailed geological mapping and active mining. Bridging this gap will require sustained investment, environmental safeguards, and technological capability — areas where collaboration with Germany could be valuable.
Wind energy as the testing ground
The wind energy sector, especially offshore wind, is emerging as the most promising arena for Indo-German collaboration. Wind turbines require over 200 kg of permanent magnets per MW of capacity. With China dominating supply, both India and Germany face risks in meeting their 2030 targets — 107 GW for India and 145 GW for Germany.
Germany already has over 9 GW of installed offshore wind capacity, while India is at a nascent stage. The Ministry of New and Renewable Energy has identified around 70 GW of offshore wind potential off the coasts of Tamil Nadu and Gujarat, but technology transfer and installation expertise remain critical gaps.
Technology transfer and industrial complementarities
German industry brings strengths in offshore wind engineering, project management, and advanced manufacturing. India offers scale, cost competitiveness, and growing downstream demand. This complementarity could support joint value chains where Germany contributes high-end technology and India develops component manufacturing, including magnets.
Recent exchanges, including a German delegation’s visit during Windergy India 2025, indicate early-stage discussions on such collaboration. Interest has also been reinforced by Europe-wide initiatives like the Hamburg Declaration, committing European nations to large-scale offshore wind expansion with resilient supply chains.
Strategic implications going forward
The Indo-German critical minerals partnership is best understood as part of a larger shift towards “friend-shoring” — building supply chains among trusted partners rather than relying on a single dominant supplier. For India, success will depend on translating policy announcements into mining, processing, and manufacturing capacity. For Germany, the challenge lies in balancing diversification with cost and reliability.
If executed well, the partnership could anchor India more firmly into global clean energy and advanced manufacturing supply chains, while giving Germany a credible alternative to China in a strategically sensitive sector.
What to note for Prelims?
- Rare earth elements are critical for EVs, wind turbines, semiconductors, and defence.
- India launched the National Critical Mineral Mission in 2025.
- Germany and Europe aim to diversify permanent magnet supply away from China.
- Offshore wind energy is highly dependent on rare-earth permanent magnets.
What to note for Mains?
- Analyse how critical minerals shape contemporary strategic partnerships.
- Discuss India’s challenges in translating rare earth reserves into production capacity.
- Examine the role of Indo-German cooperation in securing clean energy supply chains.
- Assess the geopolitical implications of China’s dominance in rare earth value chains.