By R. Suryamurthy
When China hauled India before the World Trade Organization (WTO) over New Delhi’s solar manufacturing incentives and tariffs on information technology products, Beijing presented itself as a guardian of free trade, a defender of multilateral rules, and a victim of protectionism. Yet the complaint may ultimately be remembered less for its legal merits than for the extraordinary irony at its core. The world’s most heavily subsidized industrial power is accusing a developing country of using industrial policy. If ever there was a case of the pot calling the kettle black, this is it.
The WTO’s Dispute Settlement Body has now established a panel to examine China’s challenge to India’s Production Linked Incentive (PLI) scheme for solar photovoltaic modules and related trade measures. China argues that India’s local value-addition requirements and incentives linked to domestic manufacturing discriminate against imported products and violate WTO commitments. Legally, Beijing may have a case. Politically and economically, however, the dispute opens a much larger debate about who gets to industrialize, who writes the rules, and whether the global trading system is equipped for the realities of the twenty-first century.
The timing is revealing. For nearly three decades, China built its industrial dominance through a sophisticated ecosystem of state support that combined direct grants, cheap credit, subsidized land, preferential taxation, state-directed finance, and extensive support from provincial governments. The result is visible across global supply chains, but nowhere more dramatically than in solar manufacturing.
According to the OECD’s newly released MAGIC Database of Industrial Subsidies, industrial subsidies globally reached their highest levels since the 2008-09 financial crisis, totalling approximately $108 billion in 2024. More significantly, the OECD found that Chinese firms received, on average, three to eight times more government support than competitors located in OECD countries and considerably more support than firms in countries such as India, Brazil, and Indonesia.
The same OECD analysis concluded that subsidies account for roughly 22 percent of global market-share gains achieved by firms worldwide between 2005 and 2023. For Chinese firms, the figure rises to nearly 60 percent. That statistic alone should fundamentally alter the context in which China’s WTO complaint is viewed.
China is not challenging India from the position of a disadvantaged exporter seeking fair treatment. It is challenging India from the position of a country that today controls more than 80 percent of large parts of the global solar value chain and whose dominance was itself nurtured through decades of state intervention.
The contradiction becomes even sharper when one considers the OECD’s findings regarding renewable-energy sectors. Solar panels, semiconductors, aluminium, steel, and shipbuilding were identified as the world’s most heavily subsidized industries. Chinese firms in many of these sectors consistently received subsidy levels several times higher than global averages.
In other words, the very industrial strategies that enabled China to become the world’s manufacturing superpower are now being invoked as evidence of illegitimate behaviour when adopted by others.
This is not to suggest that India’s policies are necessarily WTO-compliant. The precedent is uncomfortable for New Delhi. India previously lost a similar WTO dispute brought by the United States over domestic-content requirements under the Jawaharlal Nehru National Solar Mission. The legal architecture of the WTO has traditionally been hostile to local-content requirements and import-substitution incentives.
Yet the broader question is whether those rules still reflect economic reality. Across the developed world, industrial policy has made a dramatic comeback. The United States has embraced the Inflation Reduction Act and CHIPS Act. The European Union has launched its own subsidy programs to support strategic industries. Japan and South Korea continue to provide extensive support for advanced manufacturing. Even countries that spent decades preaching market orthodoxy now openly discuss supply-chain resilience, strategic autonomy, and economic security.
The global consensus that markets alone should determine industrial outcomes has quietly collapsed. What remains is a legal framework largely written for a different era. India’s argument, therefore, is not simply about solar modules. It is about whether developing countries have the policy space to reduce strategic dependence on dominant suppliers, create domestic manufacturing ecosystems, and participate meaningfully in the energy transition.
The uncomfortable truth is that green globalization has produced extraordinary concentration risks. OECD research shows that several strategic sectors—including solar panels, steel, aluminium, and shipbuilding—have become increasingly concentrated geographically over the last two decades, with Chinese firms capturing expanding shares of global revenue. This concentration may lower prices in the short term, but it creates vulnerabilities that governments can no longer ignore.
The COVID-19 pandemic, geopolitical tensions, semiconductor shortages, and supply-chain disruptions have fundamentally altered policymakers’ understanding of economic security. Dependence on a single country for critical technologies is increasingly viewed as a strategic risk rather than an efficiency gain.
India’s solar ambitions must be understood through that lens. New Delhi is not merely seeking to produce solar panels. It is attempting to build an entire industrial ecosystem in a sector that will define energy security, climate policy, and technological competitiveness for decades to come. Without intervention, India risks remaining one of the world’s largest solar markets while importing the overwhelming majority of its equipment.
China understands this logic better than anyone because it successfully employed it. That is why Beijing’s WTO challenge carries an unmistakable undertone of strategic self-preservation. If India succeeds in creating a competitive solar manufacturing base, it could gradually erode Chinese dominance in one of the most important industries of the green economy. The dispute therefore reflects something larger than a disagreement over tariffs and subsidies. It reflects a struggle over who will manufacture the technologies of the future.
Looking ahead, the implications extend far beyond India and China. If the WTO panel eventually rules against India, governments across the developing world may conclude that existing trade rules are incompatible with industrialization in strategic sectors. Such a perception could accelerate demands for WTO reform, particularly regarding climate-related industrial policies and green subsidies.
If India prevails, even partially, it could create new policy space for countries seeking to build domestic clean-energy industries without surrendering entirely to established manufacturing giants.
Either outcome will shape the next generation of economic policy. The deeper challenge is that the global trading system increasingly finds itself caught between two competing objectives: preserving non-discriminatory trade and enabling governments to pursue resilience, decarbonization, and strategic autonomy.
Those objectives are no longer easily reconciled. China’s complaint against India may ultimately succeed in legal terms. But it has already exposed a larger contradiction. The country whose rise was powered by one of the most extensive industrial-policy experiments in modern history is now invoking trade rules to constrain similar ambitions elsewhere. That is not merely a legal dispute.
It is a debate over whether the ladder that helped one nation climb to industrial dominance should now be kicked away from those still trying to ascend. This version is deliberately analytical, critical, data-driven, and forward-looking, while framing the dispute within the larger geopolitical contest over green industrial policy and WTO reform. (IPA Service)
