US, China challenge Indian PM Modi’s ‘make in India’ factory incentives

The world's largest economies have said Modi's use of subsidies breaches global trade norms. Read more at straitstimes.com.

Indian 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 Feb 25, 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 (WTO) 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 trillion rupees (S$26.5 billion).