React : You may need an appropriate loader to handle this file type, currently no loaders are configured to process this file(Local Node module)

I have babel loader in the library. Still after I add the library to the react application while yarn serve, I get the above error.

This is the webpack.dev.config.js (required in the webpack.config.js) in library-

//webpack.dev.config.js
const babelRCPath = require('@appfabric/infra-scripts').getConfigPath('babel', 'plugin');
const babelRCGenerator = require(babelRCPath);
const babelRC = babelRCGenerator([]);

module.exports = {
{
    BaseModule: `${process.cwd()}/src/BaseModule`,
    BaseObject: `${process.cwd()}/src/BaseObject`,
    BaseWidget: `${process.cwd()}/src/widgets/BaseWidget`,
    HOCWidget: `${process.cwd()}/src/widgets/HOCWidget`,
    PortalWidget: `${process.cwd()}/src/widgets/PortalWidget`,
    BaseActivator: `${process.cwd()}/src/application/BaseActivator`,
    CorePlugin: `${process.cwd()}/src/application/CorePlugin`,
    BaseAppDelegate: `${process.cwd()}/src/application/appdelegates/BaseAppDelegate`,
    EmbeddedAppDelegate: `${process.cwd()}/src/default/appdelegates/embedded/EmbeddedAppDelegate`,
    ActionType: `${process.cwd()}/src/application/appdelegates/actions/ActionType`,
    types: `${process.cwd()}/src/application/appdelegates/actions/types`,
    CommandActionType: `${process.cwd()}/src/application/appdelegates/actions/CommandActionType`,
    CommandForResponseActionType: `${process.cwd()}/src/application/appdelegates/actions/CommandForResponseActionType`,
    PluginRegistryService: `${process.cwd()}/src/default/PluginRegistryService`,
  },
  mode: 'development',
  externals: [
    'dcl',
    'react',
    'react-dom',
    'prop-types',
    'pubsub',
    'semver',
    '@appfabric/ui-profiler',
  ].map(
    // Add this regex to each entry to ensure we don't miss any imports like 'web-shell-core/...`
    (value) => new RegExp(`^(${value})((\\\\|/|!).+)?$`),
  ),
  output: {
    path: `${process.cwd()}/build/dist`,
    filename: '[name].js',
    library: 'web-shell-core',
    libraryTarget: 'umd',
  },
  module: {
    rules: [
      {
        test: /\.(js|jsx)$/,
        use: {
          loader: 'babel-loader',
          options: babelRC,
        },
      },
    ],
  },
};

This is the webpack.config.js

const developmentConfig = require('./webpack.dev.config.js');

module.exports = merge(developmentConfig, {
  mode: 'production',
  output: {
    filename: '[name].min.js',
    chunkFilename: '[name].min.js',
  },
});

First I add a new file Secure.jsx(having the tags) in the library. I do npm install --save <path-to-library> on my application. After I do yarn install. Then I can see the new file Secure.jsx in the node modules in the application. When I try to run the application, I get the error.

Please let me know what am I missing and also which side(library / application) I have to add the code.