Both the US and China have faced scrutiny over their own subsidy regimes.
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PRIYANSHU SINGH
Prime Minister Narendra Modi’s ambition to turn India into a global manufacturing superpower is drawing fire from the world’s largest economies, who say his use of subsidies breaches global trade norms.
On Wednesday, the US imposed preliminary duties of 126 per cent on solar imports from India, after determining the South Asian country unfairly subsidised manufacturing. The hefty levies are expected to effectively shut Indian solar panel makers out of the US market, analysts said.
The action came a day after the World Trade Organization’s dispute settlement body agreed to establish a panel to examine Beijing’s complaint that India’s incentive programmes in automotive and renewable energy technologies unfairly favour domestic goods over imports, putting Chinese products at a disadvantage. The panel was set up after consultations between the two countries — the first step in the WTO dispute process — failed to resolve China’s challenge to New Delhi’s sector-specific subsidies.
At the heart of these disputes is India’s production-linked incentive scheme, which was introduced by the Modi government in 2020 to boost domestic manufacturing. The programme, spanning 14 sectors from electronics and pharmaceuticals to solar modules and medical devices, carries a total outlay of ₹1.91 lakh crore ($21 billion).
Trading partners argue that these subsidies tilt the playing field toward local producers. In the solar sector, companies including Waaree Energies Ltd, Adani Enterprises Ltd and Reliance Industries Ltd have benefited from government support through production-linked incentives and various non-tariff barriers.
The backlash comes even as India works to steady relations with both US and China. New Delhi and Washington have only just struck a deal to end months of trade friction, a period when India was saddled with some of the highest US tariffs in Asia. Meanwhile, India is also seeking to stabilise ties with Beijing after relations plunged following the 2020 border clashes.
Both the US and China have faced scrutiny over their own subsidy regimes. In 2024, Beijing took issue with certain provisions of the US Inflation Reduction Act of 2022, alleging the subsidies are contingent on the use of domestic goods or discriminate against products of Chinese origin. Meanwhile, Europe has accused Beijing of using extensive subsidies to propel its electric vehicle and solar sectors.
India’s Ministry of Commerce and Industry did not respond to a request for comment. However, officials in New Delhi, who declined to be identified discussing a sensitive matter, said India would strongly defend its incentive programmes, arguing they fully comply with the WTO rules.
While the programmes are central to India’s goal of raising manufacturing’s share of gross domestic product to around 25 per cent, mounting pressure from key trading partners could become a headache for New Delhi. Currently, manufacturing makes up about 17% of GDP.
“Without schemes like PLI, revival of manufacturing looks difficult,” said Biswajit Dhar, a New Delhi-based independent trade economist and former professor at Jawaharlal Nehru University. At the same time, India needs to explore alternative ways to support industries, such as investing more in technology and innovation, he added.
–With assistance from Rajesh Kumar Singh.
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Published on February 26, 2026