Building India’s rare earth ecosystem

India’s approach to rare earths is undergoing a structural shift. The Union Budget 2026–27, read together with the Rare Earth Permanent Magnet manufacturing scheme approved in November 2025, marks a move away from viewing rare earths purely as extractive resources toward treating them as strategic industrial inputs. The announcement of Dedicated Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu signals an attempt to build an end-to-end ecosystem linking mining, processing, research, and advanced manufacturing, while embedding India more firmly into global value chains for critical materials.

Rare Earth Permanent Magnets, used in electric vehicle motors, wind turbine generators, electronics, aerospace systems, and defence applications, are central to modern industrial and clean-energy systems. Their high magnetic strength and thermal stability make them indispensable for technologies that India is actively promoting under its clean energy transition, advanced manufacturing push, and defence modernisation. Ensuring a reliable domestic supply of these magnets is therefore not merely a commercial consideration but a strategic imperative.

Despite this importance, India remains heavily dependent on imports of permanent magnets and downstream rare-earth products, with China dominating global supply chains, particularly in processing and refining. Publicly available government statements and industry assessments consistently underline that domestic manufacturing capacity for rare earth magnets is limited and that imports meet the bulk of current demand. With consumption expected to rise sharply by the end of the decade, driven by electric mobility, renewable energy, and electronics, this dependence poses a clear vulnerability.

What distinguishes India’s position, however, is that this vulnerability does not stem from a lack of geological potential. India possesses significant rare-earth bearing resources, particularly in the form of monazite deposits found in coastal beach sands and inland formations across several states. Government data indicate that India holds over 13 million tonnes of monazite, which contains substantial quantities of rare earth oxides. In addition, exploration by the Geological Survey of India has identified hundreds of millions of tonnes of rare-earth bearing ore across multiple projects. These figures reflect geological potential rather than immediately recoverable reserves, but they underline that India has a strong raw material base if downstream capabilities are developed.

The policy challenge, long recognised by policymakers, lies in the “missing middle” of the value chain. While extraction and initial processing exist at a limited scale, India has lacked commercial-scale separation, refining, alloying, and magnet manufacturing capabilities. This is where the ₹7,280 crore Rare Earth Permanent Magnet manufacturing scheme assumes importance. Approved in November 2025, the scheme aims to create around 6,000 tonnes per annum of integrated manufacturing capacity for sintered rare earth magnets. Financial support is structured through sales-linked incentives over five years and capital subsidies for advanced facilities, with beneficiaries to be selected through a competitive process.

The design of the scheme reflects an understanding that rare earth manufacturing is capital intensive, technologically complex, and subject to long gestation periods. Incentives alone will not guarantee success, but they can help mitigate early risks and attract both domestic and global players with relevant technology. Equally significant is the scheme’s emphasis on integration, covering the value chain from rare earth oxides to finished magnets, rather than encouraging fragmented investments.

The Union Budget 2026–27 builds on this approach by announcing Dedicated Rare Earth Corridors in four mineral-rich states. The corridor model is intended to cluster mining, processing, research, and manufacturing activities, enabling shared infrastructure, lower logistics costs, and closer coordination between industry, research institutions, and regulators. Concentrating activities geographically also allows environmental management and community engagement frameworks to be designed more coherently, a crucial consideration given the ecological sensitivity of coastal and mineral-rich regions.

These corridors are not being planned on a blank slate. IREL (India) Limited, operating under the Department of Atomic Energy, has been engaged in the processing of beach sand minerals for decades. Its existing facilities in Odisha and Kerala, including a rare earth extraction plant and a refining unit at Aluva, provide an institutional and technical base that can be expanded and modernised. Integrating IREL’s capabilities with new private investment and advanced manufacturing facilities will be critical if the corridor approach is to translate into globally competitive output.

The rare earth push is also being framed within broader national objectives. Reducing import dependence aligns with the Atmanirbhar Bharat agenda. Ensuring access to magnets for electric vehicles and wind turbines supports India’s renewable energy expansion and its Net Zero 2070 commitment. From a strategic standpoint, domestic availability of rare earth magnets strengthens supply security for defence, aerospace, and precision electronics, sectors where reliance on external suppliers carries obvious risks.

Policy reforms over the past two years provide a supportive backdrop. Amendments to the Mines and Minerals Development and Regulation Act have introduced a dedicated category for critical minerals and opened greater space for private participation. The National Critical Minerals Mission, approved in early 2025, seeks to secure sustainable supply chains for rare earths and other strategic minerals through coordinated domestic and international action. Together, these measures signal an effort to move beyond piecemeal interventions toward a more coherent framework.

At the same time, India’s strategy recognises that self-reliance does not mean isolation. Rare earth supply chains are inherently global, and India’s engagement with international partners is a central pillar of its approach. The government has entered into mineral cooperation arrangements with several resource-rich countries, including Australia, Argentina, and a number of African nations, to secure access to critical minerals. Participation in multilateral platforms such as the Minerals Security Partnership and the Indo-Pacific Economic Framework allows India to collaborate on technology, investment, and sustainable mining practices, while reducing concentration risks in global supply chains.

An important instrument in this outward engagement is Khanij Bidesh India Limited, a joint venture under the Ministry of Mines tasked with acquiring and developing overseas mineral assets. Its initiatives, including agreements for lithium and other critical minerals, illustrate how overseas resources can complement domestic processing and manufacturing ambitions.

The success of India’s rare earth strategy will ultimately depend on execution. Environmental safeguards, transparent regulatory processes, and meaningful engagement with local communities will be essential to avoid delays and opposition. Equally, manufacturing competitiveness will hinge on access to technology, skilled manpower, and assured demand from sectors such as renewable energy, defence, and electric mobility. Public incentives can catalyse investment, but long-term viability will rest on productivity, scale, and integration into global markets.

The author comments on global affairs with a focus on energy security and strategic autonomy.