Budget 2026: Rare earth corridors proposed as India navigates China’s sectoral dominance

Finance Minister Nirmala Sitharaman announced in her Union Budget 2026 speech that the government will support the mineral-rich States of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing rare earth corridors to promote the mining, processing, research, and manufacturing of critical minerals.

Also read | Union Budget 2026 LIVE

This announcement arrives as China — the dominant force in rare earth production and exports — leverages its mining industry as a strategic bargaining chip in its ongoing tariff war with the U.S. While the U.S. remains the second-largest importer of Chinese rare earths after Japan, India is also heavily dependent on China for these materials.

Chart 1 shows India’s total rare earth imports over the years and China’s share in India’s imports.

As observed from the chart, India’s rare earth imports have been increasing over time from $14.1 million in 2014 to $17.5 million in 2024. Over 45% of these minerals come from China.

China’s dominance in rare earths stems not only from resource availability but more so from its longstanding strength in mining and research capacity. Rare earth elements (REEs), despite the name, are not particularly scarce.

According to the International Energy Agency (IEA), they comprise 17 metals, typically grouped into light rare earths (LREEs) — including lanthanum, cerium, praseodymium, neodymium, samarium and europium — and heavy rare earths (HREEs) such as gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium and yttrium. Promethium is not included in the list as it is radioactive and does not occur in mineable quantities.

They are critical components in clean energy technologies such as electric vehicles and wind turbines, as well as in defence applications. Rare earths are also essential for high-tech devices including smartphones and hard drives.

Although rare earth deposits exist in countries such as Brazil, Australia, and India, China holds nearly half of the global reserves.

China is also the world’s largest producer, contributing over 60% of global production in the last five years. Beyond extraction, China dominates the value chain with around 92% of global refining capacity, according to the IEA. Moreover, in the last five years, China has been the largest exporter, supplying close to 30% of global demand.