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CONVERSATIONS: National Mineral Policy 2019 — balancing 
stakeholder interests and concerns 
 

Economic Opportunities and Environmental 
Challenges Offered by India’s New Mineral Policy 
 

Ram Ranjan  
 
1. INTRODUCTION 

India‟s National Mineral Policy (NMP) 2019 proposes to increase the 
mining of minerals by 200% in the next seven years. The objective is to 
reduce the trade deficit in the mineral sector by 50% and increase the share 
of manufacturing in the national GDP. An increase in domestic extraction 
of key minerals, such as iron, manganese and limestone, will certainly 
provide economic stimulus to the local regions besides offering a stable 
base to the manufacturing sector. The immediate benefits of domestic 
mineral extraction will be an increase in royalties to the state governments 
and employment and income generation due to forward and backward 
multiplier effects. 

 

2. NMP AND RARE EARTH MINERALS 

The NMP could focus more on the exploration and exploitation of rare 
earth minerals, which will become increasingly crucial to supporting home-
grown strategic and commercial industries in the future. For instance, 
neodymium, which has strong magnetic properties, is crucial for 
miniaturization of electronic products (e.g. smartphones) and is an essential 
component in a range of products such as MRI scans, TVs, aircrafts and 
turbines. Similarly, India‟s push towards electric cars will require a steady 

                                                           
 Department of Economics, School of Humanities and Social Sciences (SoHSS), Shiv 
Nadar University, NH - 91, Tehsil Dadri, Gautam Buddha Nagar, Uttar Pradesh, India 
201314; ram.ranjan@snu.edu.in 

Copyright © Ranjan 2020. Released under Creative Commons Attribution-NonCommercial 
4.0 International licence (CC BY-NC 4.0) by the author.  

Published by Indian Society for Ecological Economics (INSEE), c/o Institute of Economic 
Growth, University Enclave, North Campus, Delhi 110007.  

ISSN: 2581-6152 (print); 2581-6101 (web). 

DOI: https://doi.org/10.37773/ees.v3i1.93  

https://doi.org/10.37773/ees.v3i1.93


Ecology, Economy and Society–the INSEE Journal [108] 

supply of rare metals such as lithium, cobalt and neodymium.  Currently, 
India has only about 6% of global rare earth metals (at 7 MT) compared to 
China, which owns 36% (at 44 MT) (CNBC 2019). India does have a large 
reservoir of beach and sand minerals, at 35% of global reserves (The 
Economic Times 2016), and their exploitation can help support domestic 
industries. Production of strategically important monazite (which is a source 
of thorium) can further benefit from creation of processing and value 
adding ecosystems. 

 

3. MINING SECTOR’S CHALLENGES AND LIMITATIONS 

Jain (this issue), notes that the NMP is a win-win for the mining companies 
and the investors. However, for all these benefits to accrue, mining must be 
made corruption free, well-regulated, transparent, and the generated 
revenues invested in growth enhancing avenues. Global evidence indicates 
that mining revenues often get mismanaged. As a result, many mineral rich 
countries remain economically backward. Despite the strategic and 
commercial relevance of mining to countries, its long-term potential to 
support GDP growth is relatively small. The production value of non-coal 
minerals in India was only 27 billion USD in 2012 (2.1 per cent of GDP in 
2010), whereas the same figure for China was 123 billion USD (1.8 per cent 
of GDP in 2010) (International Council of Mining and Metals 2014, 14). 
Currently, in developing countries, mining contributes not more than 5% 
per cent of GDP. Given the relatively small contribution of the mining 
sector to GDP, the trade-offs from growing mining activities need to be 
considered carefully.  

 

4. RECOGNIZING MINING’S IMPACT ON THE 
ENVIRONMENT 

Mining adversely impacts the environment and impairs its ability to provide 
ecosystem services. While the new policy identifies ecological hotspot 
regions as no-go areas, it may not be enough. Kumar and Basu (both in this 
issue) point out the need for a sustainable approach that addresses the 
vagueness in NMP and the „resource curse‟ challenge.  

Three environmental aspects of mining are worth noting:   

 First, district level analysis of mining-driven deforestation suggests 
that districts that engaged in any type of mineral extraction (during 
2001 and 2014) saw a net loss of 350 sq km of forest area compared 
to a non-mining district (Ranjan 2019, 32). Further, districts that 



[109] Ram Ranjan 

engaged in coal, iron or limestone extraction suffered a larger loss of 
450 sq km compared to those that do not produce these minerals. 
States rich in iron and coal, such as Odisha, Chhattisgarh, Madhya 
Pradesh, Karnataka and Jharkhand, account for 35% of country‟s 
forest cover. Therefore, any increase in mining will invariably lead to 
higher forest loss. The restoration costs of such large-scale forest 
degradation would become substantial and must be internalized 
within the cost accounting of private and government sectors that 
will benefit under the new policy.   

 Second, deforestation and degradation of natural resources in India 
is also occurring due to the presence of non-mining related stressors, 
including urbanization, infrastructure development, climate change, 
natural hazards, population pressure, trade in timber and forest 
products, poverty and economic growth. The additional damages 
from mineral extraction in presence of these stressors can have a 
multiplier effect. Besides mining, farming is another major driver of 
deforestation. In India, agriculture still contributes 15% of GDP and 
employs more than 40% of the workforce (World Bank 2019). 
Allowing mining in agriculturally intensive regions would exacerbate 
the deforestation rate, directly as well as through a feedback process. 
The feedback process arises when mining affects soil and water 
quality, thereby reducing farm productivity. A loss in farm 
productivity promotes further clearing of forest lands.  

 Third, a nexus invariably exists between the mining firms and the 
regulatory bodies; such nexus is sustained through direct and indirect 
political donations (Magat, Krupnick and Harrington 1986, chaps. 3 
& 4). This nexus compromises the ability of the lawmakers to make 
and enforce stringent environmental regulations. The example of 
shale gas mining in rural Pennsylvania is worth studying, as it 
highlights the ineffectiveness of ex-ante economic cost-benefit 
analysis in protecting the environment and the local communities. 
Mining is often characterized by the use hazardous procedures that 
contaminate environment (such as radioactive leakages into water 
bodies, groundwater pollution or accidental spilling of chemicals or 
minerals into pristine environments). The Baotou region in China, 
which produces 85% of world‟s rare earth minerals, suffers from 
serious environmental pollution caused by leakages of reactive 
pollutants into water bodies.  Every ton of rare earth metal 
production generates 2000 tons of reactive pollutants.  



Ecology, Economy and Society–the INSEE Journal [110] 

Early recognition in the NMP of the aforementioned consequences of 
mining will facilitate sustainable approaches in mineral extraction and 
ensure that irreversible environmental damages are minimized.  

 

REFERENCES 

CNBC. 2019. “Here‟s why China‟s trade war threat to restrict rare earth minerals is 
so serious.” Accessed at https://www.cnbc.com/2019/05/30/heres-why-chinas-
trade-war-threat-to-restrict-rare-earth-minerals-is-so-serious.html on December 16, 
2019. 

International Council on Mining and Metals. 2014. “The Role of Mining in 
National Economies” (2nd edition), October 2014. Accessed December 16, 2019. 
https://www.icmm.com/website/publications/pdfs/social-and-economic-
development/romine_2nd-edition. 

Magat, W.A., A.J. Krupnick, and W. Harrington. 1987. “Rules in the Making: A 
Statistical Analysis of Regulatory Agency Behavior,” The RAND Journal of Economics 
18 (3): 461-464. https://doi.org/10.2307/2555610 

Ranjan, R. 2019. “Assessing the Impact of Mining on Deforestation in 
India”, Resources Policy, 60: 23-35. https://doi.org/10.1016/j.resourpol.2018.11.022 

The Economic Times. 2016. “India not realising potential of rare earth industry.” 
Accessed December 16, 2019. 
https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-
mining/india-not-realising-potential-of-rare-earth-
industry/articleshow/54940321.cms?from=mdr  

World Bank. 2019. “Agriculture, Forestry and Fishing, Value Added (% of GDP).” 
Accessed December 16, 2019. 
https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS on 

 

https://www.cnbc.com/2019/05/30/heres-why-chinas-trade-war-threat-to-restrict-rare-earth-minerals-is-so-serious.html
https://www.cnbc.com/2019/05/30/heres-why-chinas-trade-war-threat-to-restrict-rare-earth-minerals-is-so-serious.html
https://www.icmm.com/website/publications/pdfs/social-and-economic-development/romine_2nd-edition
https://www.icmm.com/website/publications/pdfs/social-and-economic-development/romine_2nd-edition
https://doi.org/10.2307/2555610
https://doi.org/10.1016/j.resourpol.2018.11.022
https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/india-not-realising-potential-of-rare-earth-industry/articleshow/54940321.cms?from=mdr
https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/india-not-realising-potential-of-rare-earth-industry/articleshow/54940321.cms?from=mdr
https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/india-not-realising-potential-of-rare-earth-industry/articleshow/54940321.cms?from=mdr
https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS%20on

