Budget 2026: Nirmala Sitharaman names four states for rare earth corridors as India steps up manufacturing push

On February 1, Finance Minister Nirmala Sitharaman revealed an ambitious plan to bolster India's manufacturing sector during her Union Budget address. This initiative includes the establishment of rare earth corridors, chemical parks, high-tech tool rooms, and a new scheme aimed at enhancing construction and infrastructure equipment. Sitharaman specifically mentioned the government's commitment to supporting four mineral-rich states: Odisha, Kerala, Andhra Pradesh, and Tamil Nadu, in developing dedicated rare earth corridors. "We now propose to support these states to establish dedicated rare earth corridors," she stated, emphasizing that the government is broadening its rare earth strategy to encompass mining, processing, research, and manufacturing throughout the entire value chain. The Finance Minister highlighted the ongoing efforts with the rare earth permanent magnets scheme initiated in November 2025, stating that these new measures are designed to scale up domestic capabilities and lessen reliance on imports of essential materials. In addition to rare earth initiatives, Sitharaman introduced a new program aimed at reinforcing India’s chemical sector. This scheme will assist states in creating three dedicated chemical parks, employing a challenge-based approach that utilizes a cluster-led, plug-and-play model. "To enhance domestic chemical production and reduce import dependency, we will launch a scheme to support states in establishing three dedicated chemical parks," she noted, stressing that a robust capital goods sector is crucial for improving productivity and quality across various industries. Furthermore, the announcement included the launch of the India Semiconductor Mission 2.0, signifying a policy shift towards strengthening the underlying layers of the semiconductor ecosystem. Under this revamped initiative, the government will prioritize local production of semiconductor equipment and materials while promoting the design of Indian intellectual property and working to enhance supply chains. Additionally, the allocation for the Electronics Component Manufacturing Scheme has been increased to Rs 40,000 crore, highlighting the government's determination to boost component-level manufacturing alongside finished electronics.