India pushes for critical mineral partnership with US

India’s Commerce Minister Piyush Goyal announced on Saturday that the country is actively pursuing a critical mineral partnership agreement. This initiative, if successful, could serve as a stepping stone towards a more comprehensive Free Trade Agreement (FTA) between the two nations.

Speaking at a press conference in New Delhi, Goyal revealed that he had proposed to upgrade the recently signed Memorandum of Understanding (MoU) on critical minerals to a full-fledged partnership. “I suggested that the critical mineral MoU be converted into a critical mineral partnership and become a starting point to become an FTA,” the minister said, highlighting India’s ambitious vision for bilateral trade relations with the US.

This announcement follows an initial pact signed earlier this month between India and the United States. The agreement focuses on strengthening supply chains for critical minerals such as lithium and cobalt, which are essential components in the production of electric vehicles (EV) and clean energy technologies. However, the current memorandum of understanding falls short of a comprehensive and critical trade agreement on minerals that would allow India to benefit from the US $7,500 tax credit for electric vehicles.

The push for a more robust mineral partnership aligns with the broader goals of both nations. For India, it represents an opportunity to secure a stable supply of critical minerals crucial to its growing clean energy sector and ambitious plans to adopt electric vehicles. For the United States, such partnerships are part of President Joe Biden’s strategy to diversify and protect supply chains for critical minerals, reducing dependence on countries like China.

The US administration has been actively pursuing mineral-focused trade deals as a way to broaden access to the electric vehicle tax credit introduced in last year’s Inflation Reduction Act to trusted allies. This $7,500 per vehicle incentive is a key component of U.S. efforts to accelerate the transition to electric vehicles and combat climate change.

However, the path to a full FTA between India and the US will likely be complex and time-consuming. Both nations have significant differences in several sectors, including agriculture, digital commerce and intellectual property rights. Negotiations would have to address these issues, simultaneously balancing the interests of national industries and international competitiveness.

The proposed critical mineral partnership could serve as a testing ground for broader cooperation. Success in this sector could generate confidence and establish frameworks that could be extended to other areas of commerce. It would also demonstrate both countries’ commitment to addressing global challenges such as climate change and supply chain resilience.

India’s proactive stance in pursuing this partnership reflects its growing confidence on the global stage and its recognition of the strategic importance of critical minerals in the 21st century economy. As one of the world’s fastest-growing major economies and with ambitious clean energy goals, India is positioning itself as a key player in the global transition to sustainable technologies.

For the United States, deepening ties with India in this sector is in line with its broader strategy for the Indo-Pacific. Strengthening economic ties with India, the world’s largest democracy, could serve as a counterweight to China’s influence in the region and global supply chains.

The potential impact of such a partnership goes beyond bilateral relations. A successful deal on critical minerals between India and the US could set a precedent for similar agreements with other countries, potentially reshaping global supply chains for these vital resources.

As negotiations progress, industry watchers will be watching for signs of how this initiative could impact global markets for critical minerals, as well as the broader picture of international trade agreements. The outcome of these talks could have far-reaching implications for the clean energy transition, geopolitical alignments and the future of US-India economic relations.