India has taken a decisive step to reduce its reliance on Chinese rare earth imports by approving a $820M (₹7,280 crore) incentive scheme for domestic magnet manufacturing.
The Cabinet’s green light comes as global supply chains face disruption and strategic minerals emerge as key battlegrounds.
Over the next seven years, the program will support new facilities producing 6,000 tonnes of rare earth permanent magnets annually, vital for electric vehicles, wind turbines, and advanced electronics.
The announcement follows China's recent tightening of rare earth export controls and reflects India's drive to build supply chain resilience.
Rare earth magnets are essential for advanced manufacturing, and India is determined to become a serious player in this territory, moving away from historic under-utilization of its large mineral reserves.
Why is India prioritizing rare earth magnets?
Rare earth magnets power crucial technologies, including electric vehicles, renewable energy systems, defense applications, and consumer electronics.
India's domestic industries have long depended on imports, mainly from China, making supply chains vulnerable to geopolitical tensions and export restrictions.
Reliable access to these materials is critical for national security and future industrial growth.
India’s government considers rare earths a strategic concern, and recent disruptions in supply have underscored the risk of external dependence.
As the global clean-tech economy expands, demand for rare earth magnets is surging.
This scheme is designed to help India keep pace with global innovation while safeguarding its industrial and military sectors from shocks.
Did you know?
India's monazite-rich coastal sands hold one of the world’s largest untapped reserves of rare earth elements.
What are the main features of the $820M scheme?
The plan offers a mix of sales-linked incentives and capital subsidies for manufacturers, with ₹6,450 crore dedicated to supporting sales and ₹750 crore for facility establishment.
Integrated production units will convert rare earth oxides into metals and finished magnets, creating a full value chain from mining to manufacturing.
The Ministry of Heavy Industries will oversee implementation, encouraging both domestic and foreign players to invest in India’s rare earth ecosystem.
The scheme includes seven years of support, with the first two years earmarked for setting up manufacturing capacity.
By 2030, India expects its domestic magnet consumption to double, driven largely by electric vehicles and renewable energy installations.
How does China dominate the global rare earth market?
China currently controls around 60% of global rare earth mining and roughly 90% of refining and processing capacity. Its supremacy has allowed Beijing to set stringent export controls that impact downstream industries worldwide.
China has used rare earth exports as a diplomatic lever, underscoring the need for other nations to diversify their supply chains.
India imports more than 65% of its rare earth metals and compounds from China, and in FY25, over 90% of its imported rare earth magnets originated from Chinese producers.
India’s production, despite vast reserves estimated at 6.9 million metric tonnes, represented less than 1% of global supply in 2024.
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What challenges face India's rare earth ambitions?
India faces significant hurdles, including limited downstream infrastructure, technology gaps, regulatory complexities, and environmental risks associated with mining monazite-rich sands.
Approvals related to ecological impact and radioactive waste management can delay projects, and competing international players may pressure supply and pricing.
The government hopes to address these issues by promoting public-private partnerships, expediting clearances, and investing in research and improved extraction methods.
Ensuring environmentally responsible mining will be critical, given local concerns about soil and water contamination.
Success will require balancing rapid industrial expansion with effective oversight and community engagement.
How will the new scheme impact India’s economy and security?
Economic benefits range from import substitution, reduced foreign exchange outflow, and new export opportunities to job creation across mining, processing, and manufacturing sectors.
The government projects 150,000 new jobs by 2035 as the value chain matures and domestic expertise expands.
Higher-margin value-added products will bolster India’s tech and defense sectors and strengthen its stance in regional supply negotiations.
Strategically, developing local magnet production will boost national security by making critical minerals less susceptible to geopolitical shocks.
Entry into the global rare earth market positions India as a reliable alternative supplier, with large producers in Southeast Asia likely to seek stable sources for electronics and auto manufacturing.
India’s rare earth magnet scheme positions the country for greater supply chain autonomy and global relevance.
As manufacturing ramps up, continued policy attention, environmental stewardship, and collaboration with industry experts will determine the long-term success and impact of this ambitious program.
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