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

Finance Minister Nirmala Sitharaman on February 1 announced a fresh push to build India’s domestic manufacturing backbone, unveiling plans for rare earth corridors, chemical parks, high-tech tool rooms and a new scheme for construction and infrastructure equipment in the Union Budget.

Presenting her Budget speech, Sitharaman said the Centre will support mineral-rich states, Odisha, Kerala, Andhra Pradesh and Tamil Nadu, to establish dedicated rare earth corridors.

“We now propose to support these states to establish dedicated rare earth corridors,” she said, adding that the government is expanding its rare earth scheme to cover mining, processing, research and manufacturing across the value chain.

The finance minister noted that a scheme for rare earth permanent magnets had already been launched in November 2025, and said the latest measures are aimed at scaling up domestic capacity and reducing dependence on imports in strategic materials.

Alongside rare earths, Sitharaman announced a new programme to strengthen India’s chemicals ecosystem. To boost domestic chemical production, the government will roll out a scheme to help states set up three dedicated chemical parks through a challenge-based route, using 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 said, underlining that strong capital goods capability is a key driver of productivity and quality across sectors.

Sitharaman also announced the launch of India Semiconductor Mission 2.0, signalling a shift in policy toward strengthening deeper layers of the chip ecosystem.

Under the revamped programme, the government will prioritise domestic production of semiconductor equipment and materials, encourage the design of Indian intellectual property and work to strengthen supply chains, Sitharaman said.

The government also increased the allocation for the Electronics Component Manufacturing Scheme to Rs 40,000 crore, underscoring its push to expand component-level manufacturing alongside finished electronics. 

Follow our live blog for more