How Budget 2026 Will Change India’s Rare Earth Strategy

Smartphones, laptops, wind turbines, EVs, defence systems, almost everything that modern life needs today depends on rare earth elements.

These elements are a group of 17 minerals used in high-performance components such as permanent magnets, batteries and electronic systems. Out of these 17, rare earth permanent magnets (REPMs) stand out as especially critical.

As electric mobility picks up pace and renewable energy capacity expands, demand for these magnets is expected to rise sharply over the next decade.

But for India, this isn’t just a material story anymore.

As the country pushes ahead with clean energy and advanced manufacturing ambitions, access to rare earths is quickly becoming a question of economic resilience and national security.

And the government is now stepping in to secure supply chains and reduce India’s dependence on imports.

Laying the Groundwork Before Budget 2026

In November 2025, the Indian government approved a ₹7,280 crore incentive scheme to promote domestic manufacturing of sintered rare earth permanent magnets.

The scheme aimed to create an integrated production capacity of 6,000 metric tonnes per year, reducing reliance on imported magnets used in EVs, wind turbines, electronics and defence equipment.

Earlier, in January 2025, the National Critical Mineral Mission (NCMM) was also launched with an outlay of about ₹16,300 crore, covering the entire value chain, from exploration and mining to processing, manufacturing and recycling.

This was followed by a ₹1,500 crore incentive scheme focused on recycling rare earths and other critical minerals from e-waste and industrial scrap.

Why Has Self-Reliance Become Critical?

Globally, the rare earth supply chain is heavily concentrated in China.

The country accounts for around 60% of global rare earth mining and nearly 90% of refined output and magnet production. This dominance has given China significant control over supply, with export restrictions in recent years highlighting the risks faced by import-dependent economies.

India is among the countries most exposed.

Between 2022-23 and 2024-25, China accounted for roughly 60% to over 80% of India’s permanent magnet imports by value, and nearly 85% to 90% by quantity.

With demand for REPMs expected to double by 2030, continued dependence on imports could create supply bottlenecks and cost pressures for key industries.

Simply put, if manufacturing doesn’t scale at home, and if China were to tighten supply, India would lose out.

What makes this dependence even more striking is that India isn’t short on resources.

The country holds sizable rare earth reserves, particularly monazite deposits spread across coastal and inland regions. These deposits amount to around 13.15 million tonnes[1.1] of monazite, containing an estimated 7.23 million tonnes of rare earth oxides, the core raw material needed for permanent magnet manufacturing.

Yet, limited domestic processing and manufacturing capacity has kept much of this potential locked away.

That’s why Budget 2026 matters.

What Budget 2026 Changes?

Budget 2026 marked a clear shift from scattered initiatives to a more structured industrial approach.

The government announced the creation of dedicated rare earth corridors across Tamil Nadu, Kerala, Odisha and Andhra Pradesh, four of India’s most mineral-rich states.

By setting up rare earth corridors, the government is helping companies process and manufacture rare earth products within India instead of importing them. This will make it easier for Indian firms to sell finished products like magnets and EV components to global markets, improving exports over time.

In the long run, this will help India become self-reliant and earn money through exports.

Why This Feels Like a Turning Point?

By supporting mineral-rich states and creating focused rare earth corridors, the government aims to bring mining, processing, manufacturing and research closer together.

Over time, this approach could help reduce import dependence, strengthen supply security and support India’s clean energy and manufacturing ambitions.

Just as importantly, it opens the door for exports.

As domestic capacity builds, India can move beyond importing magnets and components to exporting value-added products, supplying global EV, renewable energy and defence supply chains.

The Road Ahead for India’s Rare Earth Strategy

The broader implication of Budget 2026 is the gradual build-up of domestic capacity.

Import dependence is expected to decline, supply security to improve, and export potential to emerge over time. Rather than remaining reliant on a concentrated global supply chain, India is positioning itself to participate more meaningfully in the global rare earth value chain and, eventually, as an exporter rather than just a buyer.

Sources:

Economic Times