China has escalated its trade dispute with India by seeking the establishment of a dispute settlement panel at the World Trade Organization over India’s Production Linked Incentive (PLI) schemes for automobiles, batteries, and electric vehicles (EVs).
The request follows bilateral consultations between China and India that reportedly failed to resolve Beijing’s concerns. China argues that certain conditions attached to India’s incentive programmes discriminate against imported goods and are inconsistent with WTO trade rules.
Core of the Dispute
According to China, India’s PLI schemes provide financial incentives that are linked to domestic production and local value addition, which may disadvantage foreign manufacturers and suppliers. Beijing contends that these provisions breach multiple WTO agreements, including:
- The Agreement on Subsidies and Countervailing Measures (SCM)
- The General Agreement on Tariffs and Trade (GATT) 1994
- The Trade-Related Investment Measures (TRIMs) Agreement
China maintains that such incentives distort fair competition and restrict market access for overseas firms, particularly those supplying components and technologies for the automotive and EV sectors.
WTO Panel Request
After consultations held in late 2025 and early 2026 failed to yield a resolution, China formally requested the WTO’s Dispute Settlement Body (DSB) to constitute a panel to examine the matter. The request is expected to be taken up at an upcoming DSB meeting in Geneva.
If a panel is established, it would initiate a formal legal process that could take several months, involving written submissions, hearings, and an eventual ruling.
India’s Position
India has consistently defended its PLI schemes as being compliant with WTO obligations, arguing that the incentives are designed to promote manufacturing competitiveness, attract investment, and build resilient supply chains rather than restrict imports. New Delhi has also highlighted that similar industrial support measures are being pursued by multiple economies globally.
Broader Implications
The dispute comes at a time when countries worldwide are increasingly using incentive-based industrial policies to support strategic sectors such as electric mobility and advanced manufacturing. A WTO ruling could have wider implications for how far governments can go in linking incentives to domestic production without breaching multilateral trade rules.
For India, the outcome may influence the future structure of its PLI framework, while for China, the case underscores ongoing concerns about market access and industrial policy alignment in major emerging economies.