America-China's objection on Make in India (file photo)
Digital Desk, New Delhi. The Indian government's 'Make in India' campaign, which aims to make the country a major manufacturing hub, is now facing opposition from the world's two largest economies, the US and China.
India is currently the fifth largest economy in the world and aims to reach the third position in the coming years. But the US and China say India's subsidy policies violate international trade rules.
At the center of this controversy is India's Production Linked Incentive (PLI) scheme, which was launched by the Modi government in 2020. The objective of this scheme is to strengthen domestic manufacturing. The scheme is applicable in 14 sectors including electronics, pharma, solar equipment and medical devices and has a total provision of ₹1.91 lakh crore (about $21 billion).
According to Bloomberg report, trading partners like the US and China say that these incentives give Indian companies an unfair advantage over foreign companies. In the solar sector, companies like Vari Energies Limited, Adani Enterprises Limited and Reliance Industries Limited have benefited from PLI and other government measures.
China's complaint in WTO
On Wednesday, the US announced the imposition of an initial tariff of up to 126% on solar equipment imported from India. The US concludes that the Indian solar industry has received undue support from the government. Analysts believe that after such high tariffs, it will be difficult for Indian companies to compete in the American market.
Meanwhile, the dispute settlement body of the World Trade Organization (WTO) has decided to form a panel on China's complaint. China alleges that India's automobile and renewable energy sector incentive schemes promote domestic products and hurt imported goods.
Earlier, talks were held between the two countries under the WTO process, but a solution could not be found. After this the panel was formed. Indian officials have said that the government will vigorously defend its plans and that they believe the plans are in line with WTO rules.
These incentive schemes are part of India's strategy to increase the share of manufacturing in the country to about 25% of the gross domestic product (GDP). At present the contribution of manufacturing is about 17%.
Biswajit Dhar, an independent trade expert and former Jawaharlal Nehru University professor in New Delhi, says that without schemes like PLI, it will be difficult to reinvigorate the manufacturing sector. However, he also said that India should also look at alternative methods like investing more in technology and innovation.
The dispute has come at a time when India is trying to balance its relations with both the US and China. Recently, trade tensions between India and America have reduced, while efforts are also underway to improve relations with China.
Interestingly, America and China themselves have been under question regarding their subsidy policies. In 2024, China challenged America's Inflation Reduction Act 2022 in WTO. At the same time, European countries have also accused China of giving huge subsidies to the electric vehicle and solar industry.
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