Vishleshan for Regulatory Exams: Check Daily News Analysis 11th June 2025 

Newspapers help shape our understanding of social, political, and economic issues. They are powerful sources of knowledge, which is why they are essential tools for candidates preparing for top competitive exams like RBI Grade B, SEBI Grade A, and NABARD Grade A. However, finding reliable and concise news analysis can be tough. That’s where Vishleshan for regulatory exams steps in. It offers an in-depth analysis of important articles from leading financial newspapers such as Mint, making your exam preparation smarter and faster. Let’s dive into the news highlights and insights for June 11, 2025, where we’ll analyze the U.S. trade deal and discuss how China might be making a mistake by cutting rare earth exports.

Also, check the News Analysis of 10th June 2025 

The Road Breakers to India – US Trade Deal

Context: Negotiations for the Bilateral Trade Agreement with the US have reached a standstill as the US insists on opening sensitive sectors in India. Indian negotiators express concern over potential socio-economic impact, while aiming for a mutually beneficial deal.

Sources: Mint

India and the United States are currently engaged in critical trade negotiations to finalize an “early harvest deal” by July 9, aiming to avert the imposition of new reciprocal tariffs. This deal is significant for both nations, but negotiations are proving challenging due to sensitivities surrounding key sectors, particularly agriculture and dairy.

Importance of the Trade Deal for Both Countries

This trade deal, a Bilateral Trade Agreement (BTA), holds immense importance for both India and the US:

• Averting Tariffs: The most immediate and critical reason for the deal is to stop the imposition of new tariffs. The 90-day pause on Donald Trump’s reciprocal tariffs ends on July 8, after which a 10% universal tariff and an additional 16% country-specific US tariffs could be levied. For India, this would mean significant duties on its goods entering the US, impacting its export competitiveness. For the US, it implies that existing high Indian tariffs will persist without a deal.
• Strengthening Economic Ties: Beyond tariffs, a successful deal would deepen economic cooperation between two major global economies. The article notes that “India was the first country to be offered a trade agreement” by the US, highlighting the strategic importance of this partnership.
• Market Access and Growth: For the US, the deal represents an opportunity to “open up” the large Indian market for its agricultural goods, dairy products, and shrimp, as well as digital and medical services. For India, while pushing back on some US demands, it also seeks a “balanced agreement” that offers market access for its goods in the US.
• Global Trade Stability: In a period of “Trump-battered world trade goes into turmoil,” securing a bilateral deal between two significant players could signal a commitment to stable, rules-based trade, even if outside multilateral frameworks.

Critical Sectors for the Trade Deal

The negotiations are primarily cantered around highly sensitive sectors for both countries:

• Dairy Products: This is a particularly contentious area. India imposes a high duty of 28.42% on US dairy products, while US tariffs on Indian dairy are minimal at 0.59%. India has “traditionally resisted opening these areas due to concerns over unregulated competition and social sensitivities.” Specifically, India has made it clear that US dairy products like cheese and butter will not be allowed unless the US changes its “animal feeding practices—specifically the use of non-vegetarian feed for cattle—or adopts India’s vegetarian certification process”.
• Agriculture, Meat, and Processed Food:
  • India’s average tariff on US agriculture, meat is 37.66%, whereas US tariffs on Indian goods in the same category stand at just 5.29%.
  • For processed food, sugar, cocoa, and related preparations, India imposes a 29.66% duty on US exports, while Indian goods face only 4.67% in the US.
  • The US wants India to “significantly reduce duties on American agricultural goods”.
  • A Niti Aayog working paper suggested India open its market to a broad range of US agricultural products, including rice, pepper, soybean oil, shrimp, tea, coffee, dairy, and poultry. However, this recommendation has been criticized by think tanks like Global Trade Research Initiative (GTRI) for ignoring “risks to India’s 700 million farm-dependent citizens”.
• Digital and Medical Services: The US is keen to open up these sectors in India.
• Pharmaceuticals and Chemicals: India imposes a 9.68% duty on US chemicals and pharmaceuticals, while the US imposes only 1.06% on Indian products in this category. For pharmaceuticals specifically, US exports to India face a 10.91% duty, while Indian pharma products attract a “negligible 0.01% tariff” in the US.
• Cereals, Fruits & Vegetables, and Spices: US exports to India in these categories are taxed at an average rate of 8.82%, while Indian products face only 3.1% in the US. India has conveyed willingness to consider “tariff concessions on certain nuts and fruits”. Notably, US exports of fruits and vegetables to India were valued at $1.3 billion in 2024, compared to India’s total agricultural exports to the US of $2.12 billion in FY24. India also has concerns over stringent US sanitary and phytosanitary norms and “provisions such as the destruction of entire consignments of fruits if even a few units fail to meet prescribed standards”.

Why India Protects the Food and Dairy Sector from Foreign Competition

India’s strong resistance to opening its food and dairy sectors stems from deep-rooted concerns:

• Rural Livelihoods: The agriculture sector, including dairy, supports the livelihoods of over 700 million farm-dependent citizens in India. Unregulated foreign competition could severely impact the incomes and employment of this vast population, leading to social and economic disruption.
• Food Security: Protecting domestic production of staples like pulses, cereals, and dairy products is vital for India’s food security. Relying heavily on imports could expose the country to global price volatility and supply chain disruptions.
• Social Sensitivities (Dairy): The specific issue of non-vegetarian feed for cattle in the US dairy industry is a major “social sensitivity” for India, given the cultural and religious significance of cows and vegetarianism for a large part of its population. India insists on either a change in US animal feeding practices or the adoption of India’s vegetarian certification process.
• Unregulated Competition: India fears that opening these sectors without proper safeguards could lead to “unregulated competition,” where larger, more efficient foreign producers might overwhelm smaller, unorganized Indian farmers and dairy producers.
• Non-Tariff Barriers: India also raises concerns about stringent US sanitary and phytosanitary norms and drug regulations, which it views as “excessively harsh and trade-restrictive” non-tariff barriers.

The “Two-Way Road” Hinted in the Article

The article explicitly states: “The negotiations are not progressing as expected. The talks were meant to be two-way, as agreed. However, the US team’s insistence on opening certain critical sectors comes across as a take-it-or-leave-it offer”. This indicates:

• Initial Expectation: India’s understanding was that the BTA negotiations would involve reciprocal concessions from both sides, meaning India would open some sectors in exchange for the US opening others or easing its own barriers.
• US Stance: The Indian side perceives the US approach as a demand for India to make concessions without offering “substantial market access to Indian goods in return”. This asymmetric demand violates the spirit of a “mutually beneficial BTA” outlined in the February 13 joint statement by both leaderships.
• Asymmetry in Tariffs: The provided tariff comparison highlights this “sharp asymmetry”: 
• Agriculture, Meat: India’s average tariff on US goods is 37.66%, while US tariffs on Indian goods are 5.29%.
• Processed Food: India: 29.66%; US: 4.67%.
• Dairy Products: India: 28.42%; US: 0.59%.
• Pharmaceuticals: India: 10.91%; US: 0.01%.
• This data underscores India’s push for the US to address its high tariffs and non-tariff barriers (like sanitary and phytosanitary norms) to truly make it a “two-way” deal.

Suggested Solution to the Ongoing Problem

To resolve the impasse and achieve a mutually beneficial outcome, the following solutions can be considered:

• Reciprocal Concessions and Balanced Approach: The core issue is the perceived lack of reciprocity. The US needs to offer tangible market access and address India’s concerns regarding its non-tariff barriers (e.g., stringent drug regulations, sanitary and phytosanitary norms) in exchange for India opening its sensitive sectors. A “balanced agreement that safeguards vital sectors” for India is crucial.
• Phased Market Opening: Instead of an immediate broad opening of sensitive sectors, India could agree to a phased market opening, allowing its domestic producers to adapt to increased competition over time. This would provide a transition period and mitigate immediate negative impacts on rural livelihoods.
• Addressing Non-Tariff Barriers: For dairy, the US could explore certification processes that align with India’s vegetarian standards or develop a separate export stream for India. For fruits, more flexible inspection rules that don’t involve the destruction of entire consignments for minor non-compliance could be considered.
• Focus on Complementary Strengths: While sensitive sectors are challenging, the deal could prioritize areas where there is greater complementarity and less direct competition. For instance, focusing on digital services or specific manufacturing components where both countries have comparative advantages could build trust and momentum.
• Public Consultation: As suggested by Ajay Srivastava of GTRI, a “broader public consultation on these recommendations” (like Niti Aayog’s suggestion to open various agricultural markets) is essential to ensure that the trade deal genuinely serves India’s national interest and addresses the concerns of farm-dependent citizens. This transparency can also help build consensus for politically sensitive decisions.
• Building on Smaller Victories: Since the goal is to finalize the “first tranche of the deal” by July 9, focusing on areas of easier agreement to secure this initial phase could build momentum for more complex negotiations later. This demonstrates commitment from both sides.

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China Risks Overplaying Its Hand by Curbing Rare Earth Exports

Context: Export restrictions tend to encourage innovations elsewhere aimed at reduced dependence on such shipments. Beijing should be wary of taking this re-weaponized tool too far. Automobile industries, India’s included, have already suffered a jolt from China’s rare-earth choke.

Source: Mint

China has once again weaponized its dominant position in the supply of rare earth minerals. It has imposed stringent export curbs on these elements that are critical inputs in a range of industries from automobiles to aerospace and defence. The move comes as a response to US restrictions on the export of semiconductor technology to China. 

What are Rare Earth Minerals and Their Usages?

Rare earth minerals are a set of 17 metallic elements: the 15 lanthanides on the periodic table plus scandium and yttrium. Despite their name, they are not exceptionally rare in the Earth’s crust, but they are typically dispersed and not found in concentrated deposits, making their extraction difficult and costly. These minerals possess unique magnetic, catalytic, and luminescent properties that are indispensable in high-tech applications.

Key Usages:

• Automobiles: Essential for electric vehicle motors, catalytic converters in conventional vehicles.
• Aerospace and Defence: Used in jet engines, missile guidance systems, lasers, and radar.
• Consumer Electronics: Components in smartphones, computers, televisions, and other gadgets.
• Renewable Energy: Crucial for wind turbines and other clean energy technologies.
• Medicine: Used in medical imaging, therapeutics, and specialized equipment.
• Other Industries: Applications in metallurgy, ceramics, glass polishing, and more.

The projected demand for rare earth elements is on a steep upward trajectory. For instance, demand for rare earth elements in consumer electronics/medicine/others is projected to rise from 72 kilotonnes in 2024 to 121 kilotonnes in 2050, while demand for electric vehicles and wind energy is also expected to increase significantly. Total projected demand is expected to increase from 90 kilotonnes in 2024 to 177 kilotonnes in 2050.

Explaining the Ongoing Crisis

The ongoing crisis in rare earth minerals stems from China’s dominant position in their supply chain and its recent decision to use this dominance as a geopolitical tool.

• China’s Export Curbs: China has “once again weaponized its dominant position in the supply of rare earth minerals” by imposing “stringent export curbs on these elements”.
• Response to US Restrictions: This move is a direct “response to US restrictions on the export of semiconductor technology to China”. These actions are part of a broader “trade war” between the US and China, despite a general “truce” in the larger conflict.
• Historical Precedent: This isn’t the first time China has restricted rare earth exports. In 2010, Beijing imposed similar curbs after a dispute with Japan, though it was “forced to roll back its export curbs by the World Trade Organization in 2015”. Even then, other countries saw it as a warning of future supply vulnerabilities.

Image Source: Mint

China’s Role in the Global Supply Chain of Rare Earth Minerals

China holds a near-monopoly in the global rare earth supply chain, from mining to processing.

• Dominant Reserves and Production:
  • China possesses the largest estimated rare earth reserves in 2024, at 44 million metric tonnes, significantly more than any other country.
  • Its production far outstrips other nations, standing at 270,000 metric tonnes annually, while the next largest producer, the US, produces only 45,000 metric tonnes.
• Processing Monopoly: Beyond mining, China also dominates the downstream processing and refining of rare earths, which is a complex and environmentally intensive process. This gives it a “massive share in their production”.
• India’s Reliance: India “relies heavily on the import of rare earth elements from China”. In 2023-24, China accounted for nearly 60% of India’s rare earth element imports, with Hong Kong, Japan, and South Korea having negligible shares. This highlights India’s extreme vulnerability to China’s export restrictions.

The Impact of This Crisis and the Effectiveness of Export Restrictions

The “Chinese chokehold on the supply of rare earth minerals has sent a jolt through many industries in other parts of the world, including India”.

The effectiveness of any export restriction, as highlighted in the article, depends on three key factors:

1. Importance of the Input: How crucial is the rare earth mineral as an input in the production structure of the importing country’s economy? In this case, rare earth minerals are “critical inputs in a range of industries from automobiles to aerospace and defence”. This high importance means restrictions can have severe consequences, as feared in the automobile industry where “assembly lines…will grind to a halt”.
2. Ease of Increasing Production: How easy or difficult is it to increase the production of that input in response to higher prices that naturally follow restricted supplies? Rare earth production is complex, capital-intensive, and environmentally challenging, making it difficult to rapidly ramp up production elsewhere. This inelasticity of supply enhances China’s leverage.
3. Concentration of Production: How concentrated is the production of that input in one country or a small cartel of countries? China’s near-monopoly in rare earth production and processing means its restrictions have a far-reaching impact globally, as the rest of the world is largely “at the mercy of China”.

The Opportunity for the World and Private Companies

Image Source: Mint

While China’s dominance creates vulnerability, it also spurs innovation and diversification, presenting an opportunity for the rest of the world and private companies.

• Strategic Response: Such events “create incentives for governments as well as private companies to respond strategically”. The 1973 oil shock serves as a historical example where an embargo led to a search for new energy supplies and fuel-efficient products, demonstrating how economies can adapt.
• Technological Innovation and Diversification: Research by Laura Alfaro, Harald Fadinger, Jan S. Schymik, and Gede Virananda on China’s 2010 rare earth export restrictions showed a “surge elsewhere in technological innovations as well as exports in sectors that used rare earth minerals as inputs”. This included:
  • A surge in patents in downstream industries using rare earth minerals, focusing on more efficient usage and developing alternatives. This increase in patents outside China “exceeded the overall rise in patents in industries that use rare earth minerals”.
  • Improved productivity, proxied by export growth.
  • This indicates that “technological dynamism helped the rest of the world adapt to Chinese monopoly power”.
• Lessons from China’s Innovation: Jensen Huang, head of Nvidia, observed that US attempts to deny China access to advanced technology have “actually spurred rather than hindered Chinese innovation”. This offers two lessons for others:
  • The need for a private sector innovation ecosystem that can respond to higher prices or restricted supplies.
  • The importance of government incentives and policy clarity for innovators.
• Dynamic Economies Adapt: The broader lesson is that “dynamic economies adapt to changing circumstances”. While China’s dominance is a “strategic lever,” its “overuse of such power will create strong incentives for others to adapt by innovation”.

India’s Measures to Deal with the Situation

Image Source: Mint

Given India’s significant rare earth reserves and heavy reliance on Chinese imports, it is imperative for the country to take proactive measures.

• Unexploited Reserves: India holds the third-largest rare earth reserves globally, estimated at 6.9 million metric tonnes. However, these reserves “remain largely unexploited”. Activating these domestic reserves is a crucial first step.
• Diversification of Supply Chain: The “rising demand for rare earth elements makes a case for diversification of supply chain”. India needs to explore alternative sources for rare earth minerals and develop its own processing capabilities.
• Investment in R&D and Processing: Similar to the surge in innovation observed globally after China’s 2010 restrictions, India must invest heavily in research and development to:
  • Develop more efficient methods of extracting and processing rare earths.
  • Explore substitutes or alternatives for rare earth elements in critical applications.
  • Foster technological innovation in downstream industries to reduce reliance on these inputs or use them more efficiently.
• Government Policy and Incentives: The government needs to provide clear policy frameworks and strong incentives to encourage private sector investment in rare earth mining, processing, and related technological innovation. This includes creating a conducive environment for a “private sector innovation ecosystem”.
  • The Government of India launched the National Critical Mineral Mission (NCMM) in 2025 to establish a robust framework for self-reliance in the critical mineral sector. Under this mission, the Geological Survey of India (GSI) has been tasked with conducting 1,200 exploration projects from 2024-25 to 2030-31.
• International Collaborations: Collaborating with countries like the US, Australia (which has significant production at 13,000 metric tonnes) and others looking to reduce reliance on China can help India develop its rare earth industry and secure diversified supply chains. This could involve joint ventures for mining, processing, or technology transfer.

Final thoughts

By strategically leveraging its vast reserves and focusing on innovation and diversification, India has the potential to transform from a heavy importer of rare earths to a more self-reliant and even a significant global player in the future.

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