China has formally initiated a trade dispute against India at the World Trade Organization (WTO), challenging New Delhi's policy measures designed to boost domestic manufacturing in the solar and information technology sectors. Beijing alleges that these initiatives unfairly discriminate against imported Chinese goods.
The Core of China's WTO Complaint
In a communication filed with the global trade body, China has requested consultations with India, marking the first step in the WTO's formal dispute settlement process. The complaint centers on two primary issues: India's tariff treatment for certain technology products and specific measures that mandate the use of domestically produced goods over imports.
China, a major exporter in these sectors, contends that India's actions violate several international trade agreements. These include the General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Subsidies and Countervailing Measures, and the Agreement on Trade-Related Investment Measures.
Focus on Solar and IT Incentive Schemes
The dispute directly targets India's ambitious Production Linked Incentive (PLI) Scheme for High Efficiency Solar PV Modules. China argues that the financial incentives under this program are contingent on manufacturers meeting a "prescribed minimum local value addition requirement." This condition, according to Beijing, inherently disadvantages foreign producers, particularly from China, and affects trade in solar cells, solar modules, and various IT products.
India introduced these measures with the clear objective of strengthening its domestic manufacturing base, reducing import dependency, and positioning itself as a global hub in renewable energy and electronics. However, China views them as protectionist barriers.
Next Steps and Broader Trade Context
As per WTO rules, the requested consultations offer both nations a chance to resolve the matter bilaterally. If these talks fail, China can escalate the case by requesting the establishment of a WTO dispute settlement panel to adjudicate on the legality of India's policies.
This legal move unfolds against the backdrop of a significant and growing trade imbalance between the two Asian giants. Recent data highlights the challenge: In the last fiscal year, India's exports to China fell by 14.5% to $14.3 billion, while imports from China surged by 11.5% to $113.5 billion. Consequently, India's trade deficit with China expanded to a substantial $99.2 billion in 2024-25.
The outcome of this WTO dispute could have far-reaching implications for India's strategic industrial policies and its complex economic relationship with its largest trading partner after the United States.
