WTO dispute: China challenges India’s PLI and EV incentive policies

China: Beijing has filed a formal complaint at the World Trade Organisation (WTO), alleging that certain conditions in India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell batteries, automobiles, and electric vehicle manufacturing violate global trade rules.

According to a WTO communication dated October 20, China has sought consultations with India under the organisation’s dispute settlement mechanism, claiming that the Indian measures favour domestic products over imported ones and discriminate against goods of Chinese origin.

The complaint asserts that India’s policies appear inconsistent with its obligations under the Agreement on Subsidies and Countervailing Measures (SCM), the General Agreement on Tariffs and Trade (GATT) 1994, and the Trade-Related Investment Measures (TRIMs) Agreement.

“...as a consequence of the foregoing, the measures at issue appear to nullify or impair benefits accruing to China, directly or indirectly, under the cited agreements,” the WTO document said. China added that it looked forward to India’s response and to arranging a mutually convenient date for consultations.

The dispute centres on certain requirements that determine eligibility for, and disbursement of, incentives under India’s PLI and EV-related programmes. Beijing specifically mentioned three government initiatives:

• Production Linked Incentive (PLI) Scheme
• National Programme on Advanced Chemistry Cell (ACC) Battery Storage
• PLI Scheme for the Automobile and Auto Component Industry, and
• Scheme to Promote Manufacturing of Electric Passenger Cars in India

Both countries are members of the WTO. Under its rules, a member nation can request consultations if it believes another member’s policy harms its exports. Consultations mark the first step in the WTO’s dispute resolution process. If no agreement is reached, the complainant can ask for a dispute panel to be established to examine the case.

China, India’s second-largest trading partner, is seeking to expand exports of electric vehicles amid falling domestic sales and growing overcapacity in its auto industry. Chinese EV makers, including BYD, are looking to overseas markets such as the EU and Asia to offset slowing demand at home.

However, Chinese manufacturers face increasing trade barriers abroad. The European Union recently imposed tariffs of up to 27% on Chinese EVs to curb their dominance in the bloc’s market.

India, meanwhile, has been pushing to strengthen its domestic EV ecosystem through incentives and policy support. The government approved the National Programme on Advanced Chemistry Cell (ACC) Battery Storage in May 2021 with an outlay of ₹18,100 crore to promote local cell production and reduce import dependence.

In September 2021, it launched the PLI Scheme for Automobiles and Auto Components with a budget of ₹25,938 crore to support the manufacturing of Advanced Automotive Technology (AAT) products and create new jobs.

Additionally, in March last year, the government cleared a scheme to position India as a global EV manufacturing hub by attracting reputed international manufacturers and promoting the latest technologies.

In the 2024–25 fiscal year, India’s exports to China fell 14.5% to USD 14.25 billion, while imports rose 11.5% to USD 113.45 billion, widening the trade deficit to USD 99.2 billion.

China’s WTO complaint comes at a time when the global electric vehicle market is undergoing rapid shifts, with major economies introducing policies to protect local manufacturing and manage trade imbalances.

PTI inputs