India Plans Triple Incentives for Rare Earth Magnet Manufacturing

India is preparing to significantly scale up financial incentives for domestic manufacturing of rare earth magnets, nearly tripling the size of its support programme to more than Rs 7,000 crore, as New Delhi moves to shore up supply chains for materials critical to electric vehicles, renewable energy and defence, according to people familiar with the matter.

The proposed expansion reflects India’s growing urgency to reduce reliance on overseas suppliers—particularly China—at a time when global access to rare earth magnets has become increasingly vulnerable to trade disputes and export controls.

Rare earth magnets are key components in electric vehicles, wind turbines, smartphones and defence systems, and demand is expected to rise sharply as countries accelerate the energy transition and electrification of transport.

Global supply risks drive policy shift

China currently processes nearly 90% of the world’s rare earth output, giving it outsized influence over downstream industries. In April this year, Beijing tightened export controls on certain critical minerals as trade tensions with the United States deepened, disrupting supply chains for automakers and clean-energy manufacturers worldwide.

Those moves have sharpened concerns among governments and industry leaders about over-concentration of supply. India’s decision to substantially expand incentives for rare earth magnet production is seen as part of a broader response to these risks.

India’s production-linked incentive (PLI) plan is expected to focus on attracting private investment, promoting local manufacturing and accelerating the development of domestic capabilities across the rare earth magnet value chain, people familiar with the discussions said.

While details of the revised incentive structure are still being finalised, officials have indicated that the programme would support capacity creation, technology adoption and long-term scale-up, building on earlier policy efforts in the critical minerals space.

Push for partnerships and raw material access

Alongside domestic incentives, the government is also exploring strategic partnerships with resource-rich countries to ensure stable access to raw materials required for magnet production. India has limited domestic processing capacity for rare earths and remains dependent on imports for both raw materials and finished magnets.

Industry experts say securing upstream supply is as important as manufacturing incentives, particularly as competition for critical minerals intensifies globally.

“The expanded incentives reflect a recognition that rare earths are no longer just a trade issue but a strategic one,” said an industry executive involved in the sector, adding that policy clarity and long-term commitment would be key to attracting large-scale investment.

Industry calls for stronger institutional framework

Earlier in the day, the PHD Chamber of Commerce and Industry urged the government to take further structural steps to protect India from future supply-chain disruptions. The chamber called for the creation of a dedicated Department of Critical Minerals and advocated what it described as “aggressive mineral diplomacy” to secure overseas resources.

It also recommended closer inter-ministerial coordination and the establishment of strategic stockpiles of key minerals, drawing parallels with the U.S. strategic petroleum reserve.

Such measures, the chamber argued, would help India respond more effectively to supply shocks and geopolitical disruptions.

Energy transition raises stakes

Analysts say the stakes are rising as the global energy transition gathers pace. Studies have shown that electric vehicles are around six times more mineral-intensive than conventional internal combustion engine vehicles, while renewable energy technologies such as solar and wind can require up to three times more minerals than traditional power generation systems.

Rare earth magnets, in particular, are essential for high-efficiency electric motors and generators, making them a bottleneck material for clean energy deployment.

“By scaling up its rare earth magnet production, India aims not only to strengthen its manufacturing base but also to position itself as a meaningful player in global clean energy and electronics value chains,” according to industry reports.

Execution challenges remain

Despite the policy push, experts caution that building a competitive rare earth magnet industry will not be easy. India will need to overcome gaps in processing technology, skilled manpower and integrated supply chains, areas where China has spent decades building dominance.

Environmental clearances, financing costs and access to proven technology will also shape outcomes. However, supporters of the expanded incentive programme say early, decisive action is necessary to avoid deeper dependence as global demand accelerates.

If implemented effectively, the enlarged incentive plan could mark a turning point in India’s efforts to secure critical minerals and reduce vulnerability to external shocks—an objective that is increasingly central to the country’s industrial and energy strategy.