India has blocked China’s request to set up a World Trade Organization (WTO) dispute panel about New Delhi’s incentive programs for the automobile, battery, and electric vehicle sectors, according to WTO sources.
The decision follows discussions between India and China that did not address Beijing’s worries. It claims that India’s incentive programs are unfair and go against global trade rules.
Background of the Dispute
- China initiated the process by seeking talks with India under the WTO’s dispute settlement procedures, after alleging that certain conditions in India’s policies favour domestic products over imported ones.
- Consultations were held on November 25, 2025 and January 6, 2026, but the two sides were unable to reach a mutually acceptable outcome, prompting China to pursue further action.
- On January 16, 2026, China formally requested that the WTO’s Dispute Settlement Body (DSB) establish a panel to examine the matter.
What China Challenged
China’s complaint targets three major Indian programmes:
- The Production-Linked Incentive (PLI) scheme for the Automobile and Auto Component Industry
- The National Programme on Advanced Chemistry Cell (ACC) Battery Storage
- The Scheme to Promote Manufacturing of Electric Passenger Cars in India
Beijing argues that these measures make incentives dependent on using domestic content. It claims this is against India’s obligations under WTO agreements, including the Subsidies and Countervailing Measures (SCM) Agreement, the General Agreement on Tariffs and Trade (GATT) 1994, and the Trade-Related Investment Measures (TRIMs) Agreement.
India’s Response & WTO Process
At the WTO meeting on January 27 in Geneva, India used its right under WTO rules to block the creation of a dispute panel. This action delayed the official decision-making process.
Under WTO procedures, consultations are the first step in settling disputes. If they do not resolve the issue, the complainant can request a panel. India’s action means the panel will not be established at this time, but China can still choose to renew its request at future DSB sessions.
Trade Implications
Both India and China are members of the WTO, and China is India’s second-largest trading partner. This recent event highlights ongoing trade tensions between the two most populous countries, especially regarding industrial support policies and market access issues.
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