India to Triple Rare Earth Magnet Incentives to $788 Million

Overview

• The Government of India plans to expand its rare earth magnet manufacturing incentive scheme to Rs 7,000 crore ($788 million) — nearly three times the earlier allocation. The move is part of India’s broader strategy to build self-reliance in critical minerals and clean technologies , while reducing dependence on China , which currently dominates global rare earth processing.

Strategic Context

• The decision follows China’s tightening of rare earth export controls in April 2025 , which disrupted global supply chains. In response, India aims to position itself as an alternative hub for critical material production used in electric vehicles (EVs) , renewable energy systems , and defence technologies .
• Prime Minister Narendra Modi has called for non-weaponisation of critical minerals , underscoring the need for diversified and resilient supply chains similar to efforts underway in the US, Japan, and Europe .

Programme Details
The revised incentive proposal, currently awaiting cabinet approval, will:

• Support around five domestic companies through a combination of production-linked and capital subsidies .

• Encourage state-owned enterprises to partner with global miners to secure raw material supplies.

• Attract foreign magnet manufacturers to set up joint ventures or local subsidiaries in India.

The programme’s goal is to strengthen India’s manufacturing capacity in high-performance magnets critical for EV motors, wind turbines, and defence equipment .

Challenges Ahead
India faces several obstacles in scaling up rare earth magnet production:

• Limited technical expertise and long project timelines.

• Environmental risks associated with mining and processing rare earths.

• Technological dependence on China , which holds about 90% of global processing capacity .

• High production costs make domestic operations unviable without government subsidies in the early stages.

Research and Future Outlook
To reduce long-term reliance on rare earths, India is investing in research on alternative motor technologies , including synchronous reluctance motors , which use fewer or no rare earth materials.
Global interest in India’s market remains high, with annual demand for rare earth oxides estimated at 2,000 tonnes . However, the plan’s success could be affected if China relaxes export curbs , making imported magnets cheaper and slowing local industry growth.

Exam-Oriented Facts

• Incentive Expansion:  Rs7,000 crore ($788 million).

• Sector Focus: Electric vehicles, renewable energy, and defence.

• Implementing Mechanism: