India's 2026 Budget: Mapping Rare-Earth-Rich States for Self-Reliance Amid China's Threat
In a strategic move to bolster its self-reliance in critical industries, India is set to establish rare-earth corridors in the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. This initiative aims to foster mining, processing, research, and manufacturing capabilities within these regions, reducing the country's dependence on imports.
Finance Minister Nirmala Sitharaman highlighted the challenging external environment, where trade and multilateralism are under threat, and access to resources and supply chains is disrupted. She emphasized the impact of new technologies on production systems, increasing demands for water, energy, and critical minerals.
The budget measures are part of a broader strategy to ensure self-reliance in manufacturing rare earth permanent magnets (REPM), essential for meeting the growing demand from various sectors, including electric vehicles, renewable energy, electronics, aerospace, and defense. This move comes after China's reduction in REPM exports triggered a global shortage, prompting a shift towards more indigenous production.
Heavy Industries and Steel Minister H D Kumaraswamy stated that the rare-earth corridors will significantly enhance domestic capabilities, reduce import reliance, and stimulate investment, innovation, and skilled employment. He envisioned India becoming a global hub for high-value, sustainable manufacturing.
The budget also includes a proposal to scrap the basic customs duty on monazite, a mineral used in high-end permanent magnets, from its current 2.5% rate. Additionally, a ₹7,280 crore scheme for rare earth permanent magnets was launched in November, further supporting the country's rare-earth magnet manufacturing capabilities.
Sitharaman's announcements extended beyond the corridors, as she proposed exempting basic customs duty on imported capital goods required for processing critical minerals in India. She also suggested a tax incentive for certain critical minerals by adding them to Schedule XII of the Income Tax Act, allowing for deductions on prospecting and exploration expenses. This follows the existing incentive for minerals like gold, copper, iron ore, and aluminium ore.
