India to Defend PLI Schemes at WTO Panel After China Flags Compliance Concerns
India on February 25 said its measures to promote domestic manufacturing in the automobile and renewable energy sectors are fully compliant with global trade norms and will be strongly defended before the dispute settlement panel of the World Trade Organization.The statement comes after the WTO’s dispute settlement body, acting on a request from China, announced the formation of a panel on Tuesday to examine the matter.
India Regrets Panel Move Despite Bilateral Consultations
A government official said India regrets China’s decision to move forward with the establishment of a panel despite extensive bilateral consultations held in good faith. During those discussions, India had provided detailed explanations and clarifications regarding the measures under question.According to the official, China’s request reflects a misunderstanding of both the design and the operation of the policies being challenged. India maintains that the measures are consistent with its rights and obligations under WTO Agreements, including the General Agreement on Tariffs and Trade of 1994 and the Agreement on Subsidies and Countervailing Measures.
India will participate constructively in the panel proceedings and will vigorously defend its measures. The government has expressed confidence that the panel will conclude that the policies are aligned with WTO rules.
Dispute Centers on PLI Schemes in Auto and Battery Sectors
In October last year, Beijing raised concerns at the WTO, alleging that certain conditions under India’s Production Linked Incentive schemes for advanced chemistry cell batteries, automobiles, and the electric vehicle manufacturing policy violate global trade rules.China argued that the measures discriminate against Chinese goods and exporters. The country is a major exporter of automobiles and battery-related products and has cited potential trade impacts as part of its complaint.
Under WTO procedures, seeking consultations is the first step in the dispute settlement mechanism. If consultations do not lead to a resolution, the complainant may request the establishment of a panel to adjudicate the dispute. That stage has now been initiated.
Both India and China are members of the WTO. The dispute settlement mechanism allows a member country to file a complaint if it believes that a policy or support measure of another member harms its exports.
India China Trade Imbalance Widens in FY25
The development comes against the backdrop of widening trade imbalances between the two countries.China remains India’s second largest trading partner. In the last fiscal year 2024-25, India’s exports to China declined by 14.5 per cent to USD 14.25 billion, compared with USD 16.66 billion in 2023-24.
Imports from China, however, rose by 11.52 per cent to USD 113.45 billion in 2024-25, up from USD 101.73 billion in the previous fiscal year.
As a result, India’s trade deficit with China widened to USD 99.2 billion during 2024-25.
The WTO panel proceedings are expected to examine the legal and technical aspects of the challenged measures in the coming months, as India prepares to formally present its defense before the dispute settlement body.
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