As China tightens grip on rare earths, India works on a plan for magnets

China’s latest move to tighten export controls on rare earth materials has prompted India to accelerate its efforts toward self-reliance in magnet manufacturing, a crucial component in electric vehicles, wind turbines, defence systems and consumer electronics.

Beijing’s new restrictions, which came into effect this week, cover technologies used in the refining and processing of rare earths, the strategic minerals that China dominates globally.

The move, coming just ahead of a scheduled Xi–Trump meeting, is widely seen as an attempt to consolidate China’s monopoly and exert leverage in the escalating technology and trade competition with the United States.

India, which relies almost entirely on imports for its rare earth permanent magnets (REPMs), is now responding with a long-term plan to build an indigenous ecosystem.

India’s Rs 7,350 crore plan for self-reliance

According to reports, New Delhi is preparing a ₹7,350 crore incentive scheme to promote the domestic production of sintered rare-earth permanent magnets (REPMs). The plan, expected to run over seven years is aimed at creating a fully indigenous supply chain  from the conversion of neodymium-praseodymium oxide (NdPr oxide) to the final fabrication of magnets.

The initiative is designed to support the establishment of five integrated REPM manufacturing units, each with an annual capacity of 600 to 1,200 tonnes. These facilities will receive a mix of capital subsidies and sales-linked incentives to make production economically viable.

If implemented as planned, India could achieve a combined annual capacity of up to 6,000 tonnes, substantially reducing its reliance on imports from China.

Why magnets matter

Rare-earth permanent magnets are indispensable in modern industry. They are used in everything from electric vehicle motors and wind turbines to smartphones, medical devices, and missile guidance systems.

India currently consumes around 4,010 tonnes of REPMs every year, almost all imported. This demand is projected to double to 8,220 tonnes by 2030, driven by the government’s green energy transition and rising defence production.

Industry analysts say that building a domestic magnet ecosystem would not only reduce India’s exposure to supply shocks but also strengthen its strategic position in global value chains. “Magnets are the final stage of the rare earth value chain where most of the value addition happens. That’s where India must build capability,” an expert told Business Standard.

China’s tightening control

China accounts for more than 80% of global rare earth processing and has long used this dominance as a strategic tool. The country’s latest export control measures include restrictions on the transfer of processing technology, which foreign firms depend on to refine raw minerals into usable components.

According to Reuters, these restrictions are part of a broader effort by Beijing to ensure that rare earth resources are not used against its own interests, especially amid growing U.S.-led efforts to diversify supply chains away from China.

Beijing’s move has also affected India directly. Chinese authorities have reportedly sought written guarantees from New Delhi that magnets produced using Chinese rare earths would not be re-exported to the United States, reflecting how geopolitics is increasingly shaping trade flows in critical materials.

Building resilience amid global realignments

India’s new policy push aligns with a broader strategy to develop critical mineral supply chains in partnership with like-minded economies such as Japan, Australia, and the US under initiatives like the Quad and the Minerals Security Partnership.

However, developing rare earth refining and magnet manufacturing capacity is a complex task that involves high capital costs, specialised technology, and environmental challenges. Until recently, the absence of large-scale domestic demand made it uneconomical for Indian companies to invest in magnet fabrication.

Now, with rising EV production and renewable energy projects, that economic case is changing. The ₹7,350 crore scheme is expected to attract both Indian and foreign manufacturers, helping India close the technological gap with China.

“India has the mineral reserves but not the downstream processing or magnet-making expertise,” a senior official told Moneycontrol. “This scheme is meant to bridge that gap and ensure we are not left vulnerable to external supply disruptions.”

The road ahead

While India’s ambitions are clear, realising them will require coordinated policy action. Experts caution that incentives alone may not be enough, parallel investment in research, refining technologies and recycling will be crucial.

If successful, the initiative could mark a major step towards India’s Atmanirbhar Bharat (self-reliant India) vision, creating a domestic base for high-tech manufacturing while reducing exposure to China’s supply chain dominance.

As the global race for critical minerals intensifies, New Delhi’s magnet strategy could determine how effectively India positions itself in the next industrial revolution, one powered not by oil, but by rare earths.