India to Triple Rare Earth Magnet Incentives to $788 Million

India plans to expand its rare earth magnet manufacturing incentive scheme to over ₹7,000 crore ($788 million), nearly tripling the earlier allocation. The move seeks to secure critical materials for electric vehicles, renewable energy, and defence as the country works to reduce reliance on China, which dominates the global supply chain.

Strategic Response to Global Supply Risks

The expansion follows China’s tightening of export controls in April amid its trade dispute with the United States, which disrupted rare earth magnet supplies worldwide. India’s plan mirrors global efforts by the US, Japan, and Europe to build alternative sources. Prime Minister Narendra Modi has emphasised that critical minerals should not be “weaponised”, calling for diversified and stable supply chains.

Scope and Structure of the Programme

The revised proposal, awaiting cabinet approval, will support around five domestic firms through a mix of production-linked and capital subsidies. State-owned enterprises are leading early partnerships with overseas miners to secure raw materials. The programme’s goal is to attract global magnet makers to establish local joint ventures or subsidiaries, strengthening India’s industrial base in strategic sectors.

Challenges in Expertise and Technology

India faces significant challenges, including limited technical expertise, long project timelines, and environmental risks linked to rare earth mining. The technological know-how for efficient extraction and magnet production remains largely concentrated in China. Domestic production is currently unviable without subsidies, making government support crucial for early development stages.

Exam Oriented Facts

• India’s rare earth magnet incentive plan is set to expand to ₹7,000 crore ($788 million).
• China processes about 90% of global rare earth output.
• The initiative supports electric vehicles, renewable energy, and defence manufacturing.
• The proposal aims to assist around five companies through production-linked incentives.

Future Pathways and Global Outlook

The government is funding research into alternative motor technologies such as synchronous reluctance motors, which could eventually reduce dependence on rare earths. International suppliers have expressed interest in India’s growing market, whose annual demand for rare earth oxides stands at about 2,000 tonnes. However, the plan may encounter headwinds if China’s easing of export curbs extends to India, potentially making imported magnets cheaper and slowing domestic investment momentum.