India to Boost Rare-Earth Magnet Program to $788 Million

The Indian government is poised to significantly expand its incentive program for domestic rare-earth magnet manufacturing, aiming to increase its budget from the current allocation of approximately $290 million to nearly $788 million. This move, reported by Bloomberg and confirmed by government sources, reflects India’s strategy to reduce reliance on China, which currently dominates the global rare-earth market.

The proposed expansion is expected to provide a substantial boost to India’s manufacturing capacity for essential materials used in various sectors, including electric vehicles, renewable energy, and defense. The initiative is particularly timely, as tensions in the rare-earth market have intensified following China’s recent restrictions on exports of these critical materials.

China’s Export Restrictions and Global Market Dynamics

China controls over 90% of the world’s rare-earth refining and 98% of magnet production, according to the International Energy Agency and industry analysts. In April 2023, Beijing imposed export controls on certain rare-earth elements, citing national security concerns. These measures were expanded in October 2023, introducing stricter licensing requirements that particularly affected exports related to the U.S. defense and semiconductor sectors.

In a recent development, following a meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea, China agreed to suspend its latest rare-earth export controls for one year. This suspension is tied to reciprocal U.S. tariff reductions, which may indicate a thaw in trade relations between the two nations.

India’s Strategic Licensing and Industry Partnerships

In a sign of improving ties between India and China, Indian media reported that at least three 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 U.S. and a prohibition on their use for defense purposes.

As India moves to fortify its position in the rare-earth sector, the proposed incentive program is awaiting government approval. If sanctioned, it could significantly alter the landscape of rare-earth manufacturing in India and enhance the country’s capabilities in producing vital materials for modern technologies.

The advancements in the rare-earth sector are crucial for India’s long-term economic strategy, especially as the country seeks to establish itself as a competitive player in the global supply chain.