Investors said that while the immediate focus is on mining, the larger objective is to help India build capabilities in materials, power electronics, and critical components. This, they said, gives comfort to long-term investors backing electric vehicle (EV) and hardware startups by reducing supply chain risks.
If implemented well, the policy could also attract global companies to collaborate with Indian deeptech firms on material development and research and development (R&D), helping accelerate intellectual property (IP) creation in the country, startup founders told ET.
“What China has built over decades is large-scale refining and permanent magnet manufacturing capacity. The real value lies in processing and conversion, not just mining,” said Vasudha Madhavan, founder of Ostara Advisors, an investment banking firm specialising in climate tech, electric mobility, and sustainability.
Rare earth materials comprise a group of 17 metals that are critical to a wide range of modern technologies. Emerging industries, including EVs, robotics, the Internet of Things (IoT), and advanced electronics, use rare earth metals.
India has reserves but lacks large-scale refining and magnet-making infrastructure. Most of the value is created downstream, where India has not invested enough, industry voices said.
De-risk science and innovation
From an investment perspective, fund managers said the move will help de-risk supply chains for Indian deeptech startups across sectors, making it easier to commit capital early in their growth cycle.
“By formalising a rare earth corridor, India is signalling that it wants to move up the value chain — from extraction to processing to IP creation,” said Manu Iyer, managing director, Bluehill VC. “That clarity is what long-term capital looks for when backing hard-tech startups.” He added that this would enable the fund to look at material innovation startups.
Alok Chauhan, of Axilor Ventures, said the policy would allow investors to underwrite investments in clean mobility and deeptech more confidently. However, he added that investments will be needed across the ecosystem, including post-processing and domestic offtake capabilities.
For manufacturers, stable access to key materials remains the biggest challenge. “The biggest issue has never been demand, but the ability to rely on supply chains for magnets and advanced materials,” said Bharti Singhla, principal at Momentum Capital.
This budget can help reduce cost volatility and shorten time to market, making India more attractive for high-tech manufacturing, she said.
Rishi Srivastava, cofounder of Offgrid Energy Labs, a deeptech startup developing ZincGel battery technology, said for the initiative to succeed, India will need integrated clusters that combine mining, processing, manufacturing, and R&D. “A 360-degree approach is essential to build a sustainable ecosystem.”
On costs, Srivastava said the reduction in customs duties on processing equipment will lower capital expenditure for startups and help deep science and hardware companies scale faster.
Some industry watchers said that while the initiative is welcome, India should also encourage alternatives to rare-earth-based technologies in parallel to reduce long-term dependence.
Finance minister Nirmala Sitharaman on Sunday put forward the names of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu for setting up the dedicated rare earth corridors.
As per the International Energy Agency (IEA), global demand for rare earth elements (REEs) is projected to grow sevenfold by 2040, driven by the clean energy transition, EVs, and advanced electronics.
As per Fortune Business Insights, the market is expected to reach over $8.14 billion by 2032, with significant shortages predicted by 2035 by McKinsey and Company. China currently dominates, controlling over 90% of processing and 69% of mining.
