Govt Working on Scheme to Strengthen India's Role in Global Value Chain

To strengthen the Indian component sector's role in the global market, the government is developing a new scheme that will offer targeted financial support for both capital and operational expenses to help the industry better integrate into global value chains, according to Minister of Heavy Industries HD Kumaraswamy.

"We are working on a scheme aimed at powering India's participation in global value chains through targeted support for both capital expenditure and operational expenditure requirements of the industry. This will help bridge cost gaps, offer tariff relief on key equipment and ensure continuity of supply in the face of rising global restrictions," the minister said.

While addressing the 65th annual convention of the Automotive Component Manufacturers Association of India (ACMA), he also noted that the government is preparing fiscal incentives to encourage domestic production of rare earth magnets as magnets are central to motors of electric vehicles and its supply is currently dominated by China. 

However, it remains unclear whether the minister's proposed scheme for boosting participation in global value chains is the same as the incentives for domestic rare earth magnet production.

This comes at a time when the global automotive industry went through a rough time after China suspended the supply of rare earth magnets, a situation which threatened to halt vehilce productions across OEMs.

Amid recent disruptions in the global automotive supply chain, Commerce Secretary Rajesh Agrawal also highlighted the need for the Indian automobile industry to take the lead in building resilient supply chains and work with developed economies to anchor global value chains in the country.

Recently, Kumaraswamy had said that the government is working on a Rs 1,345 crore scheme to provide incentives to companies processing rare earth elements into magnets in India. Senior Ministry officials said it would support "end-to-end" magnet production–from rare earth oxide to finished magnets. 

Rare-earth magnets play a critical role in the automotive industry, especially as the sector accelerates towards electrification, automation, and efficiency. These magnets are important, particularly for EVs, due to their higher performance in small form factors, enhanced energy efficiency and critical functionality in both powertrains and digital systems. With China producing 60% of global rare earths and controlling nearly 90% of refining capacity, supply chain vulnerabilities remain a pressing concern.