Context:

China has recently lodged a formal complaint with the World Trade Organization (WTO) against India, objecting to New Delhi’s subsidies for electric vehicles (EVs) and battery manufacturing.

Background:

India has, in recent years, pushed aggressively to build a domestic EV and green‑technology ecosystem. Central to this ambition are multiple incentive schemes:

·         The FAME / FAME‑II scheme (Faster Adoption and Manufacturing of Electric Vehicles) which gives demand-side incentives.

·         The Production-Linked Incentive (PLI) scheme, which rewards higher domestic value addition and scale in manufacturing.

·         The PM E‑Drive programme is reported to provide subsidies for EVs and battery‑making tied to localization benchmarks.

·         In parallel, India is considering a National Critical Mineral Stockpile (NCMS) for rare earth and battery critical minerals to bolster domestic supply chains.

China’s Allegations:

China’s complaint focuses on several key legal claims:

1.       Violation of National Treatment: India’s subsidy measures allegedly treat domestic producers more favorably than foreign ones, violating WTO’s non-discrimination principle.

2.      Import‑Substitution Subsidies: China contends that some incentives are “import substitution” in nature (i.e., to encourage domestic sourcing over imports), which are categorically prohibited under WTO’s subsidy disciplines.

3.      Prohibited / Distortive Subsidies: Some programs, by their structure, may be claimed as prohibited (if contingent on export performance or import displacement).

India’s Likely Defensive Arguments:

India can deploy multiple lines of defense:

·         Security / Public Interest Exceptions: Under Article XXI of GATT, certain subsidy measures may be defended if they are deemed necessary for national security, energy transition, or environmental goals.

·         Subsidy Classification & Design: India may argue that its schemes are well‑designed to comply with WTO norms, e.g. not contingent directly on import substitution or exports, and that any advantage to domestic firms is incidental or within permissible bounds.

·         Transformation & Development Justification: India may invoke “special and differential treatment” (SDT) or argue its measures are part of its developmental policy to foster nascent green-tech industries.

WTO Dispute Settlement Process:

1.       Consultations (60 days): China has formally requested consultations. If no agreement is reached, China may ask for a dispute settlement panel.

2.      Panel Stage: The panel will hear arguments from both India and China, examine evidence, and issue a ruling.

3.      Appellate Review: The parties may appeal to the WTO Appellate Body. (However, the Appellate Body has been nonfunctional since 2019, complicating enforcement).

Conclusion:

The WTO complaint filed by China against India over EV subsidies underscores the increasing competition in the global electric vehicle market. As both countries navigate this trade dispute, the outcome will be crucial in determining the future of clean energy trade and the rules governing international commerce.