In a significant trade development, India blocks China’s WTO request to set up a dispute panel over New Delhi’s incentive schemes for the automotive, battery, and electric vehicle (EV) sectors. The move highlights rising trade tensions between the two Asian giants amid concerns over industrial policy, market access, and global trade rules.
What Triggered the WTO Dispute?
China has alleged that India’s incentive programs are trade-restrictive and discriminatory, claiming they violate obligations under World Trade Organization agreements. According to Beijing, these schemes unfairly favor domestic manufacturers while placing imported goods—particularly from China—at a disadvantage.
The dispute centers on India’s Production Linked Incentive (PLI) framework, which aims to boost domestic manufacturing, reduce import dependence, and strengthen India’s position in emerging sectors like EVs and advanced batteries.
Failed Bilateral Consultations
As per WTO rules, consultations are the first step before a formal dispute panel is set up. India and China held two rounds of bilateral talks on November 25, 2025, and January 6, 2026, but failed to reach a mutually acceptable resolution.
Following the deadlock, China requested the establishment of a WTO dispute panel. However, on January 27, 2026, India blocks China’s WTO request, exercising its right under WTO norms to prevent the panel’s formation at this stage.
India’s Official Position
Indian officials stated that New Delhi engaged with China in good faith throughout the consultation process. India argued that China’s complaint is based on an “inaccurate understanding of the facts” and said it is not in a position to accept the panel request at present.
By stating this position formally, India blocks China’s WTO request for the first time, buying time to further defend the intent and structure of its incentive programs.
Schemes Under the Spotlight
The challenged initiatives include the ₹18,100 crore PLI scheme for Advanced Chemistry Cell (ACC) batteries and the ₹25,938 crore PLI scheme for the auto and auto component sector. These programs are central to India’s strategy to accelerate EV adoption and build a resilient manufacturing ecosystem.
What Happens Next?
Under WTO procedures, a panel request can only be blocked once. If China renews its request at the next Dispute Settlement Body meeting, India will no longer block China’s WTO request, and the panel is likely to be established automatically.
A Larger Trade Context
This dispute unfolds against the backdrop of a widening trade imbalance. India’s trade deficit with China reached $99.2 billion in FY 2024–25, adding economic weight to the geopolitical and trade policy friction between the two nations.
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