India is preparing to boost its incentive scheme for rare earth magnet manufacturing to over ₹7,000 crore (around $788 million), marking a sharp increase from its earlier plan of about $290 million. The move, which still awaits cabinet approval, is designed to spur domestic production in a sector currently dominated by China and vital to industries such as electric vehicles, renewable energy, and defence.
The expanded incentive regime aims to support approximately five companies through a mix of production-linked incentives and capital subsidies. But despite the ambitious outlay, analysts caution that challenges may persist, warning that limited funding availability, a dearth of technical expertise, and lengthy project timelines could hinder implementation.
China currently controls processing of around 90 per cent of global rare earth output, and Beijing has tightened export controls in recent months amid geopolitical tensions. India’s plan is part of a broader push by nations to reduce strategic dependence on China for critical materials.
Prime Minister Narendra Modi has previously warned that critical minerals should not be “weaponised,” underlining the need for more diversified and resilient supply chains.
In parallel, the government is examining alternative technologies. One example is synchronous reluctance motors, which may offer a pathway to reduce reliance on rare earth magnets altogether.
Industry experts also note that while foreign magnet manufacturers have shown interest in supplying India, domestic firms still lack import licences for rare earth materials. India’s annual demand is estimated at around 2,000 tonnes of rare earth oxides, a level that is well within reach of global suppliers.
Despite the strong push, some uncertainties remain. The final approved funding may differ from the ₹7,000 crore figure. Moreover, if China chooses to ease export restrictions further, particularly toward India, the price advantage of Chinese magnets could undercut the competitiveness of newly incentivised domestic production.
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