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Mining Sector In India And Its Challenges

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  • Last Updated : 02 Jul, 2022

India is a mineral-rich country and mining exploration is one of the major industrial activities in India. India is one of the leading countries where varieties of minerals are collected through mining. The mining sector is expected to contribute to the GDP and economic development of the country. The mining sector also provides an opportunity for employment, infrastructure development, earning of foreign exchange, and supply of materials for green technologies. However, there has been no major improvement in the country’s GDP on account of mining in recent years. India has been facing difficulties utilizing the potential of mineral resources through mining activities. In India, despite large land areas with mineral reserves, mining activities are very limited. This is one of the main reasons for the poor contribution of the mining sector. The other factors responsible for further this decline in the growth of the mining sector are the disruptions and closure of mines in some important states due to legislative regulations and local conflicts involving social and cultural issues.

Mining Sector in India:

India is a developing country and can utilize mineral resources to meet the demands of GDP and economic growth. The mining sector is going through various challenges and disruptions that hamper its growth. There are many environmental aspects related to mining activities that create challenges in the expansion of mining. The issues of land use and conversion, waste generation, groundwater depletion, and pollution of air and water are some of the major factors that create concerns on the national level. There are probable health impacts of mining on the population. The social and cultural issues also sometimes create challenges in the execution of mining activities smoothly. 

Much of the country’s mineral reserves are located in forest-covered areas and mining can raise concerns due to environmental, social, and economic impacts generated in those areas. Earlier, minerals were considered one of the primary resources for the country. There were hardly any restrictions on environmental and social grounds. The Forest Conservation Act, of 1980 takes into account the impact of mining activities on the environment during the mineral resource extraction and production process. The legislative changes have forced many mines to close down affecting the production capacity and potential growth.

Reasons For Low GDP Contribution by Mining Sector

The various reasons for the decline in the growth of mining and low contribution to GDP are as follows: 

1. Formalities and Legal issues:

The mining sector is subjected to different formalities and clearances that are required to continue operations conveniently. These also include legal obligations that make mining activities unviable and unprofitable. 

2. Environmental Concerns:

Various mines have to close down due to failure in meeting environmental compliances. Mining is not permitted in certain areas due to the possibility of adverse effects on the population and environment. 

3. Lack of Modern Technology:

The mining sector suffers from the lack of modernized techniques for exploration and extraction. Most of the mines use old and inefficient machinery without making any progress toward the upgrade in technology.

4. Administrative Issues:

The mining sector suffers from the problem of low asset and resource underutilization, especially under the control of public sector units. Moreover, the state governments are generally involved in the auction of mines and there may be ambiguities in political approaches between the center and state. 

5. Increase In Cost:

The mining sector has to bear the pressure of taxation that makes the operation less profitable. Also, there is a lack of further investment and involvement of private enterprises in mineral exploration. 

6. Displacement of Communities:

Several mining zones are located in areas that are the natural habitat of tribes and rural communities. The displacement of these people is a matter of concern. Due to complexities related to the rehabilitation or compensation of these people, it becomes difficult to start the mining activities. Also, there are security threats in some mining belts from local people and agitators.

Important Government Data Related to Mining Sector in India:

  • The contribution of the mining sector to the GDP of India is currently 2.5%
  • India has 3527 mining leases for 40 major minerals covering a total area of 315,986 hectares.
  • The mining sector’s contribution to GDP gradually fell from around 2.4% in 2014-15 to around 1.9% in 2012-13.
  • The mining sector’s contribution to the GDP of India declined to the lowest 1.63% in 2019.

Actions Initiated by the Government: 

The Indian Government aims the development of mining in a sustainable way that focuses on the effective and optimal use of mineral reserves. Some of the measures taken as discussed as follows: 

  • The Central Government has the authority to select any mine for a specific and lease it through the auction for a specific end-use purpose. For example, some iron ore mines are utilized for dedicated steel plants. However, these captive mines can sell up to 50% of their production to the market for revenue generation. 
  • The Central Government arranges the auction of mines in consultation with state governments within a specified time frame. If the state government is unable to execute this, the central government takes over the auction process. 
  • For the mines with expired leases, the state government has to transfer the lease to a government company for up to 10 years till the time a new lessee is selected. The period of the lease given to the government company may increase as prescribed by the central government.


The mining sector has direct and indirect impacts on livelihoods and economic opportunities for the communities near the mining areas. The sector should explore growth opportunities through innovation and the development of infrastructure through advanced technology. The sector has huge potential to supply raw materials critical for various industries so there is an opportunity for collaboration and investments. There is a need to simplify the administrative procedures to enhance the utilization of mineral resources through mining. However, the implementation of mining-related rules should be enforced to prevent unauthorized or unscientific mining that may lead to accidents. The mining sector needs to discard the age-old mechanisms and obsolete tools used for mining and adopt high-end technology as per the global standard. The judicious use of miner reserves and efficiency in operations can help reduce the excess pressure on mineral resources. The structural changes, administrative policies, and technological advancements will improve the growth potential of the mining sector.


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