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Battle for growth: On India’s economic trajectory
India’s economic trajectory saw a significant increase in the December quarter of FY25 (Q3FY25), registering a 6.2% real GDP growth rate. This was higher than the revised estimate of 5.6% (5.4%) in the previous quarter but remained the slowest since Q4FY23, excluding the previous quarter’s performance.
Challenges to Growth
A. Unattainable Full-Year Growth Target:
(a) The government’s target of 6.5% growth for the full year seems difficult due to global economic uncertainties.
(b) Tariffs on imports could lead to imported inflation.
(c) The manufacturing and services sectors showed tepid performance.
B. Sectoral Performance:
(a) Primary Sector: Grew 5.2%, up from 1.8% in the same quarter last year.
(b) Secondary Sector (Manufacturing): Slowed to 4.8%, compared to 12.4% in the previous year.
(c) Tertiary Sector (Services): Grew 7.4%, down from 8.3% last year.
C. Global Trade Uncertainties:
(a) U.S. Tariffs: 25% import tariff on steel and a proposed 25% tariff on pharmaceuticals.
(b) Impact on Pharma Exports:
(i) India’s pharma exports to the U.S. were $8.7 billion in FY24, accounting for 31% of total exports.
(ii) Tariffs could lead to trade revenue losses and push firms to shift production to the U.S.
Factors Supporting Growth
A. Government Spending and Private Consumption:
(i) Government spending increased by 8.3% (from 2.3%).
(ii) Private consumption expenditure grew by 6.9% (from 5.7%).
(iii) This was supported by moderation in inflation.
B. Inflation Trends:
(i) RBI projected inflation to average 4.8% in FY25 and ease to 4.2% in FY26.
(ii) This aligns with the RBI’s medium-term target of 4%.
C. Economic Optimism and Uncertainty:
(i) Chief Economic Adviser V. Anantha Nageswaran acknowledged 7.6% growth in the next quarter as ambitious but attainable.
(ii) Maha Kumbh event might boost consumption in Q4FY25.
Concerns Over Data Methodology
(i) The National Statistical Office (NSO) has revised its methodology, factoring in industry-wise and institution-wise information.
(ii) Lack of clarity on the extent of impact on data quality and quantity raises concerns.
(iii) The NSO attributed sectoral variations to benchmark estimate revisions and updated data sources but must provide greater transparency for informed analysis.
Conclusion
India’s economic growth faces both opportunities and challenges. While higher government spending and private consumption are positive signs, manufacturing and services remain weak, and global trade uncertainties pose risks. Transparency in economic data is crucial to ensure accurate policy decisions and assessments.
Breaking China’s chokehold over the critical minerals supply chain
China has strategically consolidated its dominance over the global supply chain for critical minerals, such as copper, cobalt, nickel, lithium, and rare earth elements (REEs), through its Belt and Road Initiative (BRI). These minerals are essential for modern technologies, and Beijing’s systematic control over extraction and processing has given it an unrivaled advantage. India and its allies must urgently counter this strategy to secure alternative supply chains.
China’s Dominance in Critical Minerals
A 2025 AidData report highlights how China has invested $56.9 billion since 2000 to secure mineral reserves in 19 BRI nations, particularly in Africa, Latin America, and Southeast Asia. This dominance is reinforced by:
(i) Financial Control: Chinese state-backed institutions fund extraction and processing projects, outpacing competitors.
(ii) Strategic Investments: China ensures long-term control by acquiring majority stakes in mining ventures and securing mineral offtake agreements.
(iii) Processing Supremacy: China refines 73% of the world’s cobalt and 59% of its lithium, ensuring a stronghold over global supply chains.
Evolution of China’s Financial Playbook
Initially, China’s mineral financing was led by policy banks like the China Development Bank (CDB) and the Export-Import Bank of China (Eximbank), which accounted for 90% of pre-BRI lending. However, as risks increased, China adapted by:
(i) Syndicated Lending: By 2021, 79% of China’s critical mineral loans were syndicated, involving state-owned commercial banks and non-Chinese creditors.
(ii) Non-Public Debt Strategy: 81% of China’s mineral loans are directed at special purpose vehicles (SPVs) and joint ventures (JVs), allowing Beijing to bypass host-country liabilities while maintaining control over resources.
(iii) Collateralization Model: In the Democratic Republic of Congo (DRC), China controls 51% of cobalt exports through joint ventures like Sicomines, tying infrastructure loans to future mineral revenues.
Outmanoeuvring the West
China has gained a competitive edge over Western countries by:
(i) Providing Patient Capital: 66% of China’s mineral financing ($37.6 billion) has gone into 14 megaprojects, ensuring continuous expansion.
(ii) Subsidized Loans: Unlike Western firms constrained by environmental, social, and governance (ESG) norms, Chinese companies receive government-backed loans that undercut competitors.
(iii) Rapid Execution: China’s state-backed firms prioritize speed over regulatory concerns, enabling dominance in mining sectors across Argentina (lithium), Zambia (copper), and Indonesia (nickel).
India’s Strategic Response
India has recently launched the National Critical Mineral Mission to secure overseas mining assets and expand domestic processing. However, compared to China’s well-coordinated BRI approach, India lags in financial power and strategic execution. To counter China’s mineral dominance, India should:
(i) Strengthen Strategic Alliances:
(a) Leverage the Quad partnership (U.S., Japan, Australia, India) to pool resources and mitigate risks.
(b) Engage in the Minerals Security Partnership (MSP), a U.S.-led initiative focused on ESG-compliant supply chains.
(ii) Target Key Regions:
(a) Africa and Latin America: China faces growing resource nationalism in these regions, creating opportunities for India.
(b) The DRC’s renegotiation of the Sicomines deal and Chile’s lithium nationalization indicate a shift away from Chinese dominance.
(c) India should offer alternative models, including joint ventures with equity-sharing, technology transfers, and adherence to ESG standards.
(iii) Expand Investment in Key Minerals:
(a) Australia: Indian firms like Coal India are exploring lithium acquisitions. This approach should be extended to Zimbabwean lithium and Brazilian rare earths.
(b) Infrastructure Development: The Lobito Corridor project, backed by the U.S. and EU, aims to diversify mineral supply routes—India should participate in such initiatives.
Conclusion
China’s BRI-driven mineral acquisitions are not just economic strategies but geopolitical tools to dominate the green energy transition. While India has been a late entrant, it can still leverage Quad partnerships, South-South collaborations, and multilateral financing mechanisms to counter Beijing’s influence. The National Critical Mineral Mission must prioritize upstream investments and resilient supply chains to ensure India remains a key player in securing 21st-century resources.
Disclaimer:
This analysis is based on the editorial content published in The Hindu and is intended solely for informational and educational purposes. The views, opinions, and interpretations expressed herein are those of the author of original article. Readers are encouraged to refer to the original article for complete context and to exercise their own judgment while interpreting the analysis. The analysis does not constitute professional advice or endorsement of any political, economic, or social perspective.
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