India has the rare earths. China still makes the magnets that power its defence

The vulnerability is easy to overlook because these magnets are small compared with the platforms they enable. Neodymium-iron-boron, or NdFeB, magnets combine exceptional strength with compact size, while samarium-cobalt magnets can retain their performance in demanding environments. Rare-earth permanent magnets are considered crucial components in military aircraft, submarines and missiles, where reliability, weight and precision matter as much as volume.

India’s challenge, therefore, is not simply what is underground, but what happens after mining. The country needs to separate rare earths, turn oxides into metals, make alloys, produce magnets and ensure they meet the standards required for use in critical systems.

Where China’s Real Advantage Lies

Rare-earth mining has become somewhat more geographically diverse, but the more consequential bottlenecks remain downstream. According to the International Energy Agency (IEA), China accounted for 60% of global mined production of magnet rare earths in 2024. Its share rose to 91% of refined output and 94% of sintered permanent-magnet production.

This concentration gives Beijing enormous influence over not only the availability of raw materials but also prices, processing technology, specialised equipment and industrial expertise. It means that industries far removed from the mines can be affected by political or administrative changes.

The risk became real in April 2025, when China imposed licensing controls on seven heavy rare-earth elements, related compounds and magnets. Exports dropped sharply in April and May, forcing some overseas carmakers to cut production or temporarily close factories. Licences were later granted, and exports recovered, but the incident showed how quickly a processing problem could spread through global supply chains.

India’s concern is not that every Chinese restriction will directly target its defence sector. The real issue is that missiles, aircraft, drones and other military systems rely on a supply chain that New Delhi cannot fully control. Defence requirements must also compete with much larger civilian markets, including electric vehicles, wind turbines, consumer electronics and industrial motors.

India’s Rare-Earth Resource Paradox

On paper, India has a substantial geological base. A March 2026 parliamentary reply estimated 7.23 million tonnes of in-situ total rare-earth-oxide equivalent contained in 13.15 million tonnes of monazite across eight states. Hard-rock deposits in Gujarat and Rajasthan account for another 1.29 million tonnes.

These figures show the resources available, but not material that can be used in factories immediately. They do not reveal how much of each commercially important element can be recovered at a reasonable cost, what separation will cost or whether the final product will meet the purity and consistency that magnet manufacturers require. Much of India’s resource base lies in monazite-rich beach sand, which also contains uranium and thorium and is consequently tightly regulated.

India nevertheless has an industrial foundation. IREL (India) Limited (formerly known as Indian Rare Earths Limited) operates integrated mineral-sand mining and processing plants and produces high-purity rare-earth oxides. The government has also operationalised a samarium-cobalt magnet plant in Visakhapatnam, established pilot metal-production facilities in Bhopal and opened a facility to recover rare earths from used magnets.

What is missing is large-scale capacity to turn oxides into metals, metals into alloys and alloys into finished high-performance magnets.

The ₹7,280-Crore Manufacturing Test

The ₹7,280-crore rare-earth permanent-magnet scheme is New Delhi’s first major attempt to address this gap. Approved in November 2025, it aims to establish 6,000 tonnes of annual integrated sintered-magnet capacity. This capacity is to be divided among five beneficiaries, with each eligible for up to 1,200 tonnes a year.

The programme aims to support the full process from rare-earth oxides to metals, alloys and finished magnets. Its size, however, must be compared with projected demand.

An assessment conducted by IREL, the Defence Metallurgical Research Laboratory and the Bhabha Atomic Research Centre estimates that India will require 8,220 tonnes of rare-earth permanent magnets annually by 2030. Electric vehicles account for 3,250 tonnes of that projection and wind turbines another 1,800 tonnes.

If the government-backed plants operate at full capacity, they would meet approximately 73% of projected demand, leaving a nominal shortfall of 2,220 tonnes. That estimate does not account for capacity utilisation, production losses or differences between commercial and specialised grades.

The published demand table also provides no separate estimate for defence or aerospace. Some lack of detail is understandable, but without an aggregated non-classified figure, manufacturers may find it difficult to determine whether dedicated defence-grade production will be commercially viable.

Implementation presents another challenge. The scheme allows for a two-year setup period from the date of award, while the Ministry of Heavy Industries was still updating its manufacturer-selection documents as recently as July 29, 2026. After companies are selected, they will still need to build facilities, stabilise production and have their magnets qualified by automotive, aerospace and defence customers.

Building a Mine-to-Magnet Industrial Base

The National Critical Mineral Mission provides a broader framework. It combines government expenditure of ₹16,300 crore with an expected ₹18,000 crore of investment from public-sector enterprises and others. Its mandate covers exploration, processing, recycling, overseas asset acquisition and strategic stockpiling.

Plans for dedicated rare-earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu could bring mining, refining, research and manufacturing together in industrial clusters. However, as of April 2026, a joint working group was still being constituted to prepare the guidelines. The real benefit will come if these efforts create functioning ecosystems rather than a group of disconnected projects.

For Indian companies, the most immediate business opportunities may lie in precision machining, protective coatings, testing and the integration of magnets into motors, actuators and other subsystems. Producing alloys and sintered magnets represents a larger strategic opportunity, but it requires more capital, technical expertise and reliable access to raw materials. Separation technology, heavy-rare-earth sourcing and large-scale recycling are longer-term opportunities.

Financing will determine whether these plans create a lasting industry. The IEA estimates that building diversified magnet supply chains outside the dominant supplier will require around $60 billion over the next decade. Projects outside China generally cost more, while customers usually want proof of technical performance before committing to long-term purchases.

India may therefore need to supplement financial incentives with long-term purchase agreements, shared testing centres, aggregated demand from defence and civilian manufacturers and mechanisms to protect strategic projects from extreme price volatility.

For defence, three requirements stand out: a reliable estimate of aggregate magnet demand, a clearer process for qualifying domestic suppliers and reserves of critical oxides, alloys or finished magnets to guard against short-term disruption. India will still need overseas partners, particularly for materials and technologies that cannot be secured economically at home.

India may eventually mine more rare earths and build more defence platforms. But if it does not control the industrial stages connecting the two, localisation will remain incomplete. The country could end up replacing imported weapons with domestically assembled systems that still rely on a concentrated foreign supply chain for some of their smallest, and most consequential, components.

Aritra Banerjee is a senior journalist with Financial Express specialising in the intersection of defence, space, emerging technologies, industrial policy and the global energy transition. His work explores how technological innovation, strategic industries and geopolitics are reshaping national security and economic competitiveness in the twenty-first century.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.