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India approves $800m initiative to boost rare earth magnet production
India has unveiled a 73 billion-rupee ($800 million) strategy to develop domestic production of rare earth magnets, aiming to curb its heavy dependence on Chinese supplies in a critical sector for technology and defense.
Why rare earth magnets matter
These compact yet powerful components are essential for modern industries, powering electric vehicles, wind turbines, smartphones, medical equipment, and military hardware. Despite their small size, they play a pivotal role in global supply chains.
Plan details and targets
The government will provide financial incentives to selected manufacturers to produce 6,000 tonnes of permanent magnets annually within seven years. Officials project domestic demand will double over the next five years, driven by growth in electronics and renewable energy sectors.
Currently, India imports 80-90% of its rare earth magnets and related materials from China, which dominates over 90% of global processing. In 2025 alone, India spent $221 million on these imports.
Challenges ahead
Experts warn that funding alone won't guarantee success. India lacks large-scale industrial expertise in magnet production, unlike Japan, South Korea, and Germany, which have refined the technology over decades.
"This is a positive step, but only the beginning. India needs strategic partnerships to acquire technology, train its workforce, and build its own capabilities,"
Neha Mukherjee, Benchmark Mineral Intelligence
Dr. PV Sunder Raju, chief scientist at the National Geophysical Research Institute (NGRI), emphasized the need for robust research and development.
"You can't just allocate funds and expect results without a strong R&D foundation,"
Dr. PV Sunder Raju, NGRI
Raw material hurdles
While India holds the world's third-largest rare earth reserves-about 8% of the global total-it contributes less than 1% to global mining. Most reserves are found in coastal states like Kerala, Tamil Nadu, and Odisha, but only one mine in Andhra Pradesh is operational.
In June 2025, India reportedly directed its state-owned miner, IREL, to halt exports to Japan to prioritize domestic needs. However, India's reserves lack key heavier elements like dysprosium and terbium, which are vital for high-performance magnets, raising concerns about continued reliance on Chinese raw materials.
Scaling and competitiveness
India's current magnet consumption stands at around 7,000 tonnes annually. Even if the 6,000-tonne target is met by the early 2030s, demand may outpace supply, leaving the country vulnerable to shortages.
Price competitiveness is another challenge. Chinese magnets are significantly cheaper, and without cost-effective domestic alternatives, imports could continue to dominate the market. Some experts suggest extending incentives to buyers to encourage adoption of locally produced magnets.
Global context and outlook
India is not alone in its efforts to reduce dependence on China. The EU and Australia have launched similar initiatives, spurred by China's export restrictions during trade disputes, which disrupted global supply chains in 2024.
Rajnish Gupta, a tax and economic policy specialist at EY India, acknowledged the scheme's ambition but stressed the need for sustained effort.
"This is better than inaction. Indian players must leverage entrepreneurial energy to build a viable ecosystem,"
Rajnish Gupta, EY India
Despite the obstacles, the plan signals India's commitment to strengthening its rare earth supply chain and reducing strategic vulnerabilities.
