India is accelerating efforts to reduce its dependence on China for rare earth magnets, a critical component in electric vehicles (EVs), renewable energy systems, and defence technologies. This urgency follows China’s recent imposition of export restrictions on rare earth magnets—a sector where it holds a near-monopoly, controlling about 70% of global rare earth element (REE) mining and 90% of worldwide processing and production. These restrictions have sent shockwaves through global supply chains, particularly impacting India's automotive industry, which currently has only about a month’s worth of rare earth magnet inventory for EV manufacturing.

Government Initiatives And Industry Response

In response, the Indian government has launched a multi-pronged strategy to secure its rare earth supply chain. The Department of Science has provided funding to Hyderabad-based Midwest Advanced Materials Private Ltd (MAM) to advance the commercial manufacturing of neodymium materials and rare earth permanent magnets. MAM is expected to commence commercial production within six months, initially targeting an output of 500 tons annually, with plans to scale up to 5,000 tonnes per year by 2030. The initiative is supported by India Rare Earth Ltd (IREL), which will supply the necessary raw materials, making the venture financially viable.

Additionally, the government is exploring the commercialisation of magnet-making technologies developed by public sector entities and formalising alternative supply arrangements with countries such as Vietnam and the United States. India is also considering sending a delegation of auto industry leaders to China to expedite export clearances as a short-term contingency.

Policy And Incentives

To stimulate domestic production, the Ministry of Heavy Industries is drafting a plan to offer production-linked fiscal incentives and subsidies. These measures are designed to bridge the price gap between Indian-made magnets and cheaper Chinese imports, making local manufacturing more competitive and attractive to private investors. The National Critical Mineral Mission, launched in April 2025, further underscores the government’s commitment to achieving self-reliance in strategic minerals like neodymium.

Challenges And Long-Term Vision

Despite possessing the world’s third-largest reserves of rare earth elements (approximately 6.9 million tonnes), India’s domestic production capacity remains insufficient due to limited private investment in mining and processing infrastructure. Most of the rare earth materials extracted by IREL have historically been allocated to the atomic energy and defense sectors, leaving other industries reliant on imports from China.

To address this, India is ramping up exploration activities, with the Geological Survey of India identifying new rare earth resources in Rajasthan and launching 16 exploration projects in FY25. However, most of these projects are still in the early reconnaissance (G4) stage.

International Partnerships And Diversification

Recognising the need to diversify supply sources, India is also seeking partnerships with countries rich in rare earth resources, such as Vietnam, the United States, and Kazakhstan. These international collaborations aim to secure alternative raw material supplies and reduce vulnerability to geopolitical disruptions.

Conclusion

India’s race to break free from China’s grip on rare earth magnets is marked by a sense of urgency and a clear strategic vision. By combining immediate contingency measures, policy incentives, domestic capacity building, and international partnerships, India aims to establish a resilient and self-sufficient rare earth supply chain. However, building this ecosystem will require sustained investment, technological advancement, and close cooperation between government and industry, with the ultimate goal of safeguarding the nation’s critical industries against future supply shocks.

Based On Business Line Report