India Expands Rare-Earth Manufacturing Incentives to $788 Million

The Indian government is set to expand its incentive program for domestic rare-earth manufacturing, aiming to increase its funding to approximately $788 million. This move is part of a broader strategy to reduce reliance on China, which currently dominates the rare-earth market. According to a report by Bloomberg, the new package will nearly triple the initial allocation of $290 million and is designed to support key industries such as electric vehicles, renewable energy, and defense.

The incentive program is still awaiting official approval, but its anticipated expansion highlights India’s commitment to securing essential materials amidst rising tensions in the global rare-earth market. China has recently imposed restrictions on the export of rare-earth metals, which are crucial for various high-tech applications. These minerals are central to industries ranging from electronics to defense, placing them at the heart of ongoing trade disputes between the United States, European Union, and China.

In April, China first introduced export controls on rare-earth elements used in military applications, citing national security concerns. The measures were further tightened in October with stricter licensing requirements, significantly affecting exports to the US defense and semiconductor sectors. Following a meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea last week, Beijing agreed to suspend its latest export controls for one year in exchange for reciprocal cuts to US tariffs and restrictions.

China’s dominance in the rare-earth sector is significant, with over 90% of global refining and 98% of magnet production occurring within its borders, according to the International Energy Agency and industry analysts. This overwhelming control has raised alarms among countries seeking to establish more independent supply chains for these critical materials.

In a sign of thawing relations between India and China, recent reports indicate that at least three Indian companies—Continental India, Hitachi, and Jay Ushin—have received licenses to import Chinese rare-earth magnets. These licenses come with specific conditions, including restrictions on exporting the materials to the US and prohibiting their use for defense applications.

As India invests in boosting its domestic capabilities, the expansion of the incentive program could play a pivotal role in reshaping the global landscape for rare-earth materials. By fostering local production, India aims to secure a stable supply of these vital resources, thereby enhancing its strategic autonomy and economic resilience in the face of geopolitical challenges.