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What is China’s complaint against India at WTO?
For preliminary Examination: Current events of antional and international Significance
For Mains Examination: GS II & III - International relations & Economy
Context:
China has filed a complaint with the World Trade Organization (WTO) against India. It alleges that India is providing subsidies, as part of the Production-Linked Incentive (PLI) scheme, for the development of advanced chemistry cell (ACC) batteries; for boosting the auto sector; and for facilitating the production of Electric Vehicles, in contravention of WTO law.
Read about:
World Trade Organization (WTO)
Production-Linked Incentive (PLI) scheme
Key takeaways:
China has lodged a formal complaint with the World Trade Organization (WTO), alleging that India’s Production-Linked Incentive (PLI) schemes for Advanced Chemistry Cell (ACC) batteries, the automobile sector, and Electric Vehicle (EV) manufacturing violate WTO rules. According to China, these initiatives amount to trade-distorting subsidies that favor domestic production.
Understanding the PLI Scheme
Launched in 2020, the PLI scheme is a key industrial policy initiative aimed at enhancing India’s manufacturing competitiveness. It offers financial incentives based on incremental production and sales in selected strategic sectors. The primary objectives are to strengthen India’s participation in global value chains (GVCs) and integrate Micro, Small, and Medium Enterprises (MSMEs) through backward linkages.
The three PLI schemes challenged by China include:
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The PLI for ACC batteries, promoting large-scale battery manufacturing.
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The PLI for the automobile and auto component sector, supporting Advanced Automotive Technology (AAT) products.
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The PLI for EVs, designed to attract global electric vehicle manufacturers to establish operations in India.
China’s Allegations
China contends that these PLI schemes offer financial incentives tied to Domestic Value Addition (DVA), effectively encouraging the use of locally produced inputs over imported ones. For example, the auto sector PLI requires a 50% DVA, while the ACC battery scheme mandates 25% DVA. According to China, these conditions discriminate against imported—particularly Chinese—components and thus contravene WTO norms
WTO Rules on Subsidies
While countries retain the sovereign right to grant subsidies for industrial development, the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) ensures that such measures do not distort international trade.
Under Article 1 of the SCM Agreement, a subsidy is defined as a financial contribution by a government or public entity that confers a benefit and is specific to certain enterprises or industries. The SCM classifies subsidies into three categories:
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