India has cleared the decks for a big push to develop domestic capacity in rare-earth permanent magnets, a component that lies at the heart of clean energy, defense technology and electronics manufacturing. The Union Cabinet has cleared a ₹7,280 crore scheme to encourage local production of these magnets that would be used in electric vehicle motors, wind turbines, robotics, medical devices, and missile systems.
The funding is not only considerable in size but also indicative of a strategic shift in how India would like to reposition itself within the global technology supply chain. For decades, rare-earth magnets have been controlled by one country. China commands over eighty percent of worldwide production. India’s dependence on importation constrains the ability of the country to scale up domestic manufacturing in many key sectors. This new scheme attempts to alter this structural dependence.
What the Scheme Funds
According to the official briefing covered by Reuters and Economic Times, the programme aims to build a production capacity of six thousand metric tonnes per year for rare-earth permanent magnets. This is to be distributed across five integrated manufacturing units, each of which has to handle everything from material processing to final magnet production.
These units would be supported through the incentivization of capital subsidies and sales-linked incentives. Capital support would allow companies to invest in the high-cost equipment required in order to facilitate extraction, separation, alloying, and magnetization. Similarly, sales-linked incentives could reduce the risk for investors by guaranteeing a minimum level of financial viability during the first few years of the enterprise.
India is also using the scheme to spur end-to-end domestic manufacturing. Rare-earth minerals, like neodymium and praseodymium, are available in India but are shipped out in raw form. The value addition happens abroad. The new scheme tries to retain that value inside the country.
Why This Funding Is Unusually Important
Unlike more visible sectors, such as electronics or consumer manufacturing, rare-earth processing is capital-intensive and technologically complex. Private companies rarely enter without strong state backing. The Indian government has taken note of this bottleneck. Earlier attempts to scale production stalled because the financial risks were too high.
The ₹7,280 crore outlay changes the risk calculation. It provides for predictable, long-term incentives and reduces investment uncertainty. This is important because rare-earth magnet plants require specialized furnaces, sintering systems, controlled atmospheres, and precision metallurgy. Each one of these involves high upfront cost.
The scheme also brings in clarity that was missing all these years. Without a stable policy environment, India’s private sector avoided large investments in rare-earth value chains. Now, with subsidies and clear demand emerging from electric vehicles, defence aerospace, and renewable energy sectors, companies have a stronger reason to invest.
Link to India’s broader industrial strategy
India’s semiconductor, electronics and EV policies have pointed to a recurring challenge: domestic firms are significantly dependent on imported components. Permanent magnets are one such critical link. Important as batteries and chips may be, without rare earth magnets motors – used in electric vehicles and precision instruments – cannot function.
With this capacity, India will gradually reduce its exposure to geopolitical shocks. Global supply chains for rare earths have frequently suffered disruptions, and many countries have faced shortages whenever there have been trade frictions. India wants resilience in advanced manufacturing, not just self-sufficiency in raw minerals.
The demand for rare-earth magnets is expected to soar in India because of electric vehicle adoption, wind energy expansion, and defence modernization. Building domestic supply is, hence, a strategic decision rather than strictly an economic one.
Challenges Ahead
Funding solves part of the problem, but not all. Rare-earth metallurgy requires deep technical expertise, a stable power supply, and advanced environmental controls. India must also strengthen research institutions to develop the alloys and magnet processing techniques suited to its industrial needs.
The global rare earth market is also volatile. Price fluctuations affect profitability of new plants. They will require long-term procurement contracts from the EV manufacturers, renewable energy developers, and defense producers to sustain operations beyond the incentive period.
Another challenge is environmental regulation. Processing of rare-earths generates waste that has to be handled with high precision. India will need strong compliance systems to prevent ecological damage.
A Step Toward Technological Independence
India’s new scheme for magnet manufacturing is one of the most ambitious industrial moves that the country has undertaken in years. Rare-earth magnets may sound like a niche product, but it forms the backbone of tomorrow’s clean energy and defence ecosystems. The ₹7,280 crore funding provides the much-needed push for industry to take the first step. A successful outcome would mean that India will gain not just manufacturing capacity but also strategic leverage. Dependence on imports will go down, domestic expertise will rise and strengthen several sectors dependent on high-performance magnets. The funding may not solve every constraint, but it creates the foundation for a capability that India has lacked for decades.
Clear Cut Research Desk
New Delhi, UPDATED: Nov 28, 2025 11:46 IST
Written By: Janmojaya Barik
