Rare Earths, Magnets and the Green Transition: Why India Is Betting on the Bottleneck

At the end of 2025, rare earth elements (REEs) sit at an uneasy crossroads of climate ambition, industrial policy and geopolitics. They are not the most voluminous inputs of the clean energy transition, yet a narrow subset has emerged as a gatekeeper for some of its most critical machines — electric vehicle motors, wind turbines and advanced electronics. The central question today is no longer whether REEs matter, but whether countries can secure resilient and affordable supply chains without reproducing the environmental damage and governance failures of the past.

Why magnets, not minerals, are the real chokepoint

The principal vulnerability in the REE supply chain lies not in mining, but in high-performance permanent magnets — especially neodymium-iron-boron (NdFeB) magnets. These magnets are indispensable for EV traction motors and direct-drive wind turbines. When supply disruptions occur, it is these elements — not the entire basket of rare earths — that transmit shocks across industrial economies.

This distinction matters. Countries can announce new mines and still remain strategically dependent if they lack downstream chemical separation and magnet manufacturing capacity. In REEs, chemical refining plays the role that refining does in crude oil: it is the stage that confers real control. This structural reality explains why China continues to dominate global supply chains even when new deposits are discovered elsewhere.

China’s centrality — and the limits of diversification

China’s near-monopoly over rare earth processing and magnet manufacturing has made diversification far more complex than simply opening mines in new geographies. Export controls and regulatory tightening by Beijing in recent years have underscored how quickly supply vulnerabilities can translate into industrial disruption.

For importing countries, this has reframed policy priorities. The focus has shifted from geological abundance to midstream capability — separation, alloying and magnet production — where capital intensity, environmental risk and technological know-how form high entry barriers.

India’s late-2025 pivot to permanent magnets

Against this backdrop, India’s decision in late 2025 to prioritise magnet manufacturing over mining marks a strategic inflection point. The ₹7,280-crore incentive scheme to establish an integrated ecosystem for producing 6,000 tonnes of sintered rare earth permanent magnets annually signals a recognition that controlling the bottleneck yields disproportionate benefits.

If successful, domestic magnet production would reduce India’s exposure to high-impact imports while enabling downstream manufacturing in EVs, wind components and advanced electronics. In effect, magnets become the platform on which broader green industrial capabilities can be built.

The upstream challenge: monazite, thorium and governance

Yet the hardest problems lie upstream. India’s principal domestic source of rare earths is monazite-bearing beach sand, which is interlinked with thorium and other materials relevant to the nuclear programme. This places the sector within a tightly controlled governance framework involving multiple regulators and public sector entities.

Extraction and processing therefore demand exceptional regulatory coordination, stringent waste management, and sustained community engagement. Environmental compliance is not an afterthought here; it is a core industrial input. Any misstep risks public opposition, regulatory paralysis and reputational damage that could stall the entire value chain.

From exploration to capacity: the missing middle

Under the “National Critical Mineral Mission”, the “Geological Survey of India” has been tasked with a large slate of exploration projects through 2031. But geological knowledge alone does not translate into industrial capability.

What India lacks is sufficient separating, refining and alloying capacity — the midstream bridge between ore and magnets. Building this requires regulatory clarity, reliable public financing, and credible enforcement mechanisms that can withstand environmental and political scrutiny.

Making magnet manufacturing bankable

Downstream, magnet production itself must be made commercially viable. This hinges on long-term offtake commitments from EV, wind and electronics manufacturers, which can de-risk private investment. Without assured demand, magnet plants risk becoming stranded assets in a volatile global market.

Equally important is process innovation. Reducing dependence on the most supply-constrained elements through material substitution, recycling and efficiency gains can soften future shocks and lower strategic vulnerability.

What the green transition will reward next

The next phase of the global green transition will reward countries that can scale supply chains without undermining environmental credibility, and that distribute risk rather than concentrating it in a single geography. For India, this means moving decisively from policy intent to industrial execution.

Magnets, not mines, are the immediate test. If India can build this capability with credible environmental governance baked in, it will not only cut import dependence but also claim a durable position in the clean energy economy — one where resilience matters as much as speed.