Context:
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China has filed a complaint at the World Trade Organization (WTO) challenging India’s Production Linked Incentive (PLI) schemes for automobiles, electric vehicles (EVs), and Advanced Chemistry Cell (ACC) batteries.
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The move highlights rising global scrutiny of industrial policies that promote domestic manufacturing and reflects increasing trade tensions between India and China.
Key Highlights:
WTO Dispute / International Trade Issue
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China alleges that certain conditions in India’s PLI schemes violate global trade rules.
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The complaint covers PLI schemes related to:
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ACC battery manufacturing
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Automobile sector
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Electric vehicle (EV) manufacturing
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Government Initiative / Policy Objective
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India’s PLI schemes are intended to:
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Boost domestic manufacturing capacity
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Attract foreign and domestic investment
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Strengthen supply chains in strategic sectors
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Support the transition to clean mobility
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Concerns Raised by China
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China argues that the schemes may impose:
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Local content requirements (use of domestic inputs)
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Export-linked obligations
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Such provisions may be inconsistent with WTO principles of:
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Non-discrimination
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Fair competition
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National treatment
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Possible WTO Dispute Settlement Process
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The complaint could lead to:
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Bilateral consultations between India and China
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If unresolved, formation of a WTO dispute panel
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Recommendations or rulings requiring policy modification
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Significance / Strategic Implications
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Reflects broader contestation over industrial policy as countries push for:
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Self-reliance
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Green technology leadership
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Reduced dependence on China-centric supply chains
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May impact India’s efforts under Make in India and EV ecosystem expansion.
Relevant Prelims Points:
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PLI Scheme: Financial incentive program rewarding companies based on incremental sales to boost domestic production.
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ACC (Advanced Chemistry Cell): Next-generation battery technology critical for EVs and renewable energy storage.
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WTO: Global body regulating international trade and resolving disputes among member countries.
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WTO Dispute Settlement Mechanism: Formal process involving consultations, panel rulings, and appellate review (currently constrained).
Issue + Causes
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Dispute arises due to concerns that India’s incentives may favor domestic firms through:
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Domestic sourcing mandates
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Export performance requirements
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WTO rules generally restrict such trade-distorting subsidies.
Benefits of PLI Schemes
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Strengthens India’s manufacturing base in future industries.
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Encourages investment in EVs and battery production.
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Supports climate-friendly industrial transition.
Challenges / Impact
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WTO challenge may:
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Delay implementation or require redesign of schemes
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Increase India–China trade tensions
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Raise questions about compatibility of industrial policy with global trade norms
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Relevant Mains Points:
Economy and Industrial Policy Dimension
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PLI schemes are part of India’s push for:
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Atmanirbhar Bharat
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Global competitiveness in manufacturing
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Clean energy transition
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International Relations Linkage
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WTO disputes reflect economic competition shaping diplomacy.
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India must balance:
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Domestic development priorities
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Compliance with multilateral trade rules
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Conceptual Clarity
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WTO disciplines prohibit subsidies tied to:
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Export obligations
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Mandatory local content use
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However, policy space exists for incentives aligned with legitimate development goals.
Way Forward
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India should:
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Defend schemes within WTO-compatible frameworks
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Ensure incentives are non-discriminatory and transparent
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Strengthen domestic manufacturing without violating trade commitments
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Use consultations to prevent escalation into prolonged disputes
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UPSC Relevance (GS-wise):
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GS 2 (International Relations): WTO disputes, India–China trade tensions
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GS 3 (Economy): Industrial policy, PLI schemes, EV and battery manufacturing
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Prelims: PLI, ACC batteries, WTO dispute settlement