India's rare-earth magnet incentive program will triple in scale, reaching US$788 million.

India is set to expand its rare-earth magnet incentive program, planning to nearly triple its current scale to over 70 billion rupees (US$786 million), aiming to boost domestic production in the rare-earth magnet industry, which is currently dominated by China. According to Bloomberg, the proposed increase in funding for India’s rare-earth magnet incentives is now awaiting cabinet approval. This represents a significant budget hike compared to the previous US$290 million initiative, which focused primarily on critical materials for electric vehicles, renewable energy, and defense sectors. Sources familiar with the matter note that, as details remain undisclosed, the final allocation plan for the incentive program could still be subject to adjustments. Amid escalating U.S.-China trade tensions, China tightened export controls in April, prompting India—and several other nations—to accelerate efforts in building resilient supply chains for rare-earth magnets. Currently, China processes about 90% of the world’s rare-earth production, and its export restrictions have disrupted the global supply of these essential materials for automakers worldwide.

According to the news agency, earlier this year, Indian Prime Minister Narendra Modi emphasized the need to avoid weaponizing critical minerals and called for the establishment of stable, diversified global supply chains. India’s plan to expand its rare earth industry aligns with the global initiative aimed at reducing reliance on China. However, the country faces significant challenges, such as limited funding and technical expertise, as well as excessively long project timelines. Without government subsidies, domestic rare earth production in India remains unviable, prompting state-owned enterprises to take the lead in pursuing overseas mining partnerships. Meanwhile, rare earth magnet manufacturing technology continues to be concentrated primarily in China. Moreover, the economic extraction of rare earths also confronts numerous obstacles, including environmental risks associated with their coexistence with radioactive elements. To address these issues, the government’s expanded initiative will provide support to roughly five companies through a combination of production-linked incentives and capital subsidies.

Despite China’s recent move to issue the first batch of import licenses for rare-earth magnets to India, no licenses have been granted to Indian companies so far. A spokesperson from India’s Ministry of Heavy Industries has yet to comment on the matter. In addition to supporting the production of rare-earth magnets, the government is also funding research into synchronous reluctance motors—technology that could significantly reduce reliance on rare-earth materials. Meanwhile, several overseas suppliers have expressed interest in supplying rare-earth materials to India, with global producers expected to easily meet the country’s annual demand of approximately 2,000 tons of rare-earth oxides. India hopes to attract global magnet manufacturers to set up local subsidiaries or joint ventures by expanding its incentive programs, thereby reducing the nation’s dependence on imports from China. However, if China extends its recent policy of easing export restrictions—previously applied to the U.S. and EU—to India, this ambitious plan could face significant challenges. Such developments might make Chinese magnets cheaper and more readily available, potentially discouraging long-term investments in India’s burgeoning rare-earth magnet industry.