In a significant move to secure its clean energy and defence future, India is set to nearly triple its incentive program for rare earth magnet manufacturing to over Rs 7,000 crore ($788 million) up from an earlier allocation of approximately $290 million. The proposal, currently awaiting Union Cabinet approval, marks one of India's most ambitious steps to reduce dependence on China in a sector critical for electric vehicles, renewable energy, and national security.
Rare earth permanent magnets primarily made from neodymium, iron, and boron, are the invisible workhorses powering the global green transition. These tiny components sit at the heart of electric vehicle motors and wind turbines, determining up to 30% of an EV's efficiency. A single offshore wind turbine can carry two tonnes of magnets at its core. Without them, an electric vehicle is just a heavy metal frame, and a wind turbine is merely a sculpture.
Global demand is surging. The International Energy Agency estimates that neodymium magnet demand could double again by 2030. For India alone, projected annual demand could reach 8,000 to 10,000 tonnes by 2030 for EV manufacturing, with wind power adding thousands more.
China dominates 80% to 90% of global high-performance magnet production and controls 95% of heavy rare earth elements that prevent magnets from overheating, particularly crucial for India's hot climate. Last year, Beijing tightened export controls on both rare earth materials and manufacturing machinery turning routine imports into approval-dependent processes.
According to customs data, India imported over 53,000 tonnes of rare earth magnets in FY25, with more than 90% sourced from China. This stark dependence exposes a strategic vulnerability that Prime Minister Narendra Modi has explicitly warned against, cautioning that critical minerals should not be weaponised.
India possesses approximately 6% of the world's rare earth reserves, concentrated along the coastal belt between Odisha and Andhra Pradesh. However, the final step of precision engineering and sintering that turns powder into power has always been outsourced. The expanded incentive program aims to change this.
The government plans to support around five companies through production-linked and capital subsidies, hoping to attract global magnet manufacturers to establish operations in India. IREL has already begun work on a rare earth permanent magnet plant in Visakhapatnam. The National Critical Mineral Mission complements this by securing mined feedstock, enabling recycling and reducing single-source dependence.
India is also exploring partnerships with Japan, which built its own supply chain after facing a Chinese rare earth embargo in 2010. Japanese firms like Toyotsu Rare Earths India and Proterial have already evaluated or established operations in India.
For a complete list of key players and valuation metrics, check our Top Rare Earth Stocks in India guide.
The road to self-reliance faces significant hurdles. Technological expertise remains concentrated in China while mining and refining rare earths is expensive and environmentally sensitive due to associated radioactive elements. Domestic production may remain uncompetitive without sustained subsidies, especially if China relaxes export controls.
To hedge these risks, the government is funding research into synchronous reluctance motors technology that eliminates the need for rare earth magnets entirely providing a long-term strategic alternative.
If successful, this push will insulate India's electric two-wheeler boom from geopolitical cost shocks, provide supply certainty for wind developers, and create high-value engineering jobs. Defence systems would be freed from external chokepoints. Importantly, India is building recycling into its policy framework from the start-up to ensure that 50% of magnet metal content in retired EV motors can be recovered.
By tripling its rare earth magnet bet, India is recognising a fundamental truth: industrial strength is often decided not by the largest factory or boldest announcement but by the smallest component no one thought to secure until it became too important. Control the magnet and the movement belongs to you.
*Rare Earth Magnet Stocks in India 2025: GMDC, Hindustan Zinc & NLC Expansion Plans
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