NEW DELHI: In a significant move to strengthen India’s position in global supply chains, Finance Minister Nirmala Sitharaman announced the establishment of dedicated rare earth corridors during the presentation of the Union Budget 2026 on February 1.
This initiative aims to promote the full spectrum of activities related to rare earth elements, from mining and processing to research and manufacturing, as part of a broader strategy to reduce the country’s heavy reliance on imports, particularly from China.
Understanding Rare Earth Corridors
Rare earth corridors are specialized hubs designed to integrate the entire value chain of rare earth elements (REEs), which are essential for high-tech industries including electric vehicles, renewable energy systems, electronics, aerospace, and defense. These corridors will focus on extracting REEs from sources like mineral sands and coal mine overburden, while also advancing technologies for manufacturing rare earth magnets used in smartphones, defense equipment, space technology, and modern machinery.
The initiative builds directly on the Rare Earth Permanent Magnets (REPM) scheme launched in November 2025, which carries a financial outlay of Rs 7,280 crore over seven years and targets the establishment of 6,000 metric tonnes per annum of integrated manufacturing capacity.
States Selected and Their Strategic Role
The corridors will be set up in the mineral-rich coastal states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu, chosen for their abundant deposits of beach sand minerals, particularly monazite, which contains valuable rare earth oxides such as neodymium and praseodymium.
In Kerala, for instance, the scheme is expected to attract Rs 42,000 crore in investments and create 50,000 jobs, leveraging the state’s 32.435 million tonnes of mineral-sand reserves, including 1.9 million tonnes of monazite. Kerala Finance Minister K.N. Balagopal emphasized the state’s vision, stating, “Kerala, through its proposal, aims to have industries based on the minerals established in Kerala. The State does not want to have the minerals merely mined and carted off outside the State.”
Similarly, Odisha and the southern states are poised to benefit from enhanced processing of minerals like graphite, vanadium, and titanium, which will support industries ranging from battery storage to defense applications.
Addressing Global Dependencies and Economic Impacts
The primary goal of these corridors is to mitigate India’s vulnerability to supply chain disruptions, given China’s dominance in the sector, it produces around 60% of global rare earth magnets and processes nearly 90% of raw materials worldwide. Commerce and Industry Minister Piyush Goyal described China’s recent pause on REE exports as “a wake-up call for the world.”
By fostering domestic capabilities, the government anticipates boosting manufacturing across sectors like electric vehicles where India aims for 50% of new vehicles to be EVs by 2030, renewables, and heavy industries, while also exploring alternative sourcing from countries such as Australia, Argentina, Brazil, and Chile. This aligns with the National Critical Minerals Mission, which emphasizes recycling and a circular economy to enhance resource utilization.
Complementary Budget Measures
Complementing the rare earth push, the budget includes a full exemption of basic customs duty on capital goods for critical mineral processing, as well as an increase in the Electronics Components Manufacturing Scheme outlay from Rs 22,999 crore to Rs 40,000 crore.
Finance Minister Sitharaman noted, “The budget proposes raising the Electronics Components Manufacturing Scheme outlay from 22,999 crores to 40,000 crores, alongside new initiatives such as ISM 2.0, rare earth corridors, and dedicated chemical parks.”
Additionally, a Rs 10,000 crore investment over the next five years has been proposed for the biopharma sector, focusing on biologics manufactured from living organisms to advance manufacturing in strategic and frontier areas, including healthcare and advanced technology. This ties into broader efforts to support critical sectors like semiconductors and nuclear energy, with the Department of Atomic Energy receiving Rs 24,124 crore.
Industry and Expert Reactions
Industry leaders have welcomed the announcements, highlighting their potential for long-term growth. Sanjiv Ganeriwala, Chairman of the Mining Council Eastern India at ASSOCHAM, stated that “beneficiation and refining of graphite will lead to large-scale battery storage for solar energy and other industries, apart from boosting the refining of vanadium for alloys and batteries, and titanium for defence, space, and paint industries.”
Nitin Gupta, Co-founder & CEO of Attero, remarked, “By supporting domestic mining, processing, research and manufacturing, the government is building resilient supply chains that will be central to India’s clean-tech future.”
The Confederation of Indian Industry (CII) also praised the corridors for promoting India’s leadership in rare earth magnets and critical minerals. With elections looming in states like Tamil Nadu and Kerala, these measures are seen as strategically timed to drive regional development and economic opportunities.
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