Budget 2026: Sitharaman pitches rare earth corridors in four states as India counters China supply risks

India Budget 2026: Amid growing global anxiety over China’s tightening grip on rare earth supplies, Union Finance Minister Nirmala Sitharaman on Sunday unveiled a fresh push to build India’s domestic capabilities, announcing government support for dedicated rare earth corridors in key mineral-rich states while presenting the Budget for 2026–27.

“A scheme for rare earth permanent magnets was launched in 2025 November. We now propose to support the mineral rich states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to establish dedicated rare earth corridors,” Sitharaman said in the Lok Sabha.

The proposal forms part of India’s accelerating strategy to shield itself from global supply disruptions and China’s dominance over rare earth processing -- materials that are critical for electric vehicles, wind turbines, electronics and defence systems. The Modi government has steadily shifted its approach from exporting raw materials to building a domestic, end-to-end rare earths ecosystem spanning exploration, processing, manufacturing and recycling.


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"Once we are able to identify, explore, and process these minerals, making them available domestically, our dependence on external sources for rare earths will decrease. We have also identified the states where we want to establish these corridors. These are very important developments, particularly for magnets and three dedicated chemical properties. Equally significant is the focus on construction equipment, which will be crucial for building tunnels and metro systems," the Finance Minister said in the post-budget press conference.

Last year, Centre rolled out the National Critical Mineral Mission (NCMM) with an outlay of about Rs 16,300 crore to strengthen domestic capabilities across the value chain, including exploration, mining, beneficiation, processing and recycling of critical minerals such as rare earth elements. The mission aims to cut import dependence and align India more closely with global strategic mineral supply chains.

On the manufacturing side, the government had approved a Rs 7,280 crore incentive scheme in late 2025 to promote domestic production of sintered rare earth permanent magnets. The scheme targets the creation of 6,000 metric tonnes per annum of integrated manufacturing capacity in India, covering the full chain from rare earth oxides to finished magnets -- a crucial input for EV motors, wind turbines, electronics and defence equipment.

To deepen technological capability, Sitharaman said the government will also support the establishment of high-tech tool rooms by central public sector enterprises at two locations. These facilities will operate as digitally enabled automation service bureaus, locally designing, testing and manufacturing high-precision components at scale and at lower cost. In addition, a separate scheme will be introduced to upgrade construction and infrastructure equipment, strengthening domestic manufacturing of high-value, technologically advanced machinery.

The rare earth push is being complemented by broader measures aimed at strengthening electronics and semiconductor manufacturing. Sitharaman announced a proposed outlay of Rs 40,000 crore for electronics components manufacturing and said the government will launch Semiconductor Mission 2.0, building on the first phase that expanded India’s chip ecosystem. The next phase will focus on producing equipment and materials, developing full-stack Indian intellectual property, and strengthening supply chains.

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Alongside capacity creation, the Centre has moved to conserve domestic rare earth resources. In mid-2025, state-run India Rare Earths Ltd (IREL) was directed to suspend an export agreement with Japan, signalling a clear policy preference for prioritising domestic needs amid tightening global supply conditions.

Recognising the need for sustainability and long-term supply security, the government has already approved a Rs 1,500 crore incentive scheme to promote recycling of critical minerals, including rare earths. Running from FY26 to FY31, the programme focuses on recovering minerals from e-waste, end-of-life electronics and industrial scrap, easing pressure on primary mining while supporting a circular economy.

On the upstream side, mining regulations have been simplified, critical mineral blocks auctioned and geological surveys expanded to identify new rare earth deposits -- reforms aimed at drawing greater private sector participation in a space long dominated by public sector entities.