Shaktikanta Das says India must build capacity in rare-earth magnets to cut import reliance

India must focus on building domestic capacity in critical, import-dependent sectors like rare-earth magnets and energy to shield itself from global disruptions and secure long-term growth, Reserve Bank of India Governor Shaktikanta Das has said.

Speaking at the Kautilya Economic Conclave in New Delhi, Das said the country's economy is now within "striking distance" of a sustained 8% growth rate. He argued that India’s recent economic resilience is no accident, but rather the direct result of a decade of structural reforms, fiscal discipline, and manufacturing strategies designed to act as buffers against international shocks.

Targeting critical imports

A key focus of the governor's strategy is reducing India's vulnerability in supply chains for advanced technologies. Das specifically pointed to rare-earth magnets—which are vital for electric vehicles, electronics, and wind turbines—as a sector where India needs to establish robust domestic production rather than relying on foreign suppliers.

Building domestic capacity in these specialized areas, alongside energy security, is seen as essential for sustaining the country’s manufacturing momentum. Das said the country’s external sector has remained resilient, aided by a steady surplus in services trade, rising inward remittances, and diversified exports, but argued that deeper domestic capability is the next necessary step.

The path to 8% growth

The Indian economy grew by 7.8% in the June quarter, following a 7.9% expansion over the previous financial year. Das attributed this momentum to robust domestic demand and investment, supported by major policy changes over the past decade.

He cited the introduction of the Goods and Services Tax (GST), banking sector clean-ups, flexible inflation targeting, and the rapid expansion of digital payments as key structural changes that have stabilised the economy.

Looking ahead, Das said that the pace of economic activity would accelerate over the next five years, driven partly by the adoption of artificial intelligence. He noted that AI has the potential to significantly improve public service delivery, healthcare, education, and overall productivity.

To support this growth, Das called for deeper domestic financial markets. He urged faster development of the corporate bond market, pension and insurance funds, municipal finance, and new methods for financing infrastructure. Sustaining this reform momentum, he said, would keep India on track to meet its target of becoming a developed nation by 2047.