WTO and India

WTO rules against India’s export subsidies

Note4Students

From UPSC perspective, the following things are important :

Prelims level : WTO

Mains level : India and WTO


  • The WTO’s dispute settlement panel ruled that India’s export subsidy schemes, including the provision for special economic zones, violated core provisions of global trade norms.

A recap of India’s dispute with the US

  • Last year, the US had taken India to the WTO’s over the issue of export subsidy schemes, claiming that they were hurting American companies.
  • The US alleged that some subsidy programmes run by the Indian government were giving undue advantage to Indian businesses.
  • The Trump administration filed a case against India citing a violation of the SCM Agreement as India’s gross national product per capita was over $1,000.
  • While the government had earlier said that it would phase out the aged export subsidy programmes, no such scrapping has occurred.
  • It has also come to light that India is already working on rolling out new schemes to replace the old programmes.

Recent WTO ruling

  • Upholding US’s complaints in the case WTO panel rejected India’s claims that it was exempted from the prohibition on export subsidies.
  • India had made claims under the special and differential treatment provisions of the WTO’s Agreement on Subsidies & Countervailing Measures (SCM).
  • The panel further ruled that India is not entitled to provide subsidies depending on export performance and said it’s per capita gross national product crossed $1,000 per annum.

What does it mean?

  • It is worth noting that under Article 3.1 of the WTO’s SCM agreement, all developing countries with gross per capita of $1,000 per annum for three consecutive years are required to stop all export incentives.
  • The US had earlier accused India of giving prohibited subsidies to Indian steel producers, pharmaceuticals, chemicals, information technology, textiles and apparel.
  • While the panel ruled in favour of US and urged India to withdraw the subsidies without delay.
  • While the panel upheld most of the claims made by the US, it rejected some points pertaining to a subset of exemptions from customs duties and an exemption from excise duties.

Impact of the ruling

  • Some of the schemes that will be affected by the WTO’s ruling include Merchandise Exports from India Scheme (MEIS), export-oriented units (EOU) scheme.
  • It will hamper some sector-specific schemes, including Electronics Hardware Technology Parks (EHTP) scheme and Bio-Technology Parks (BTP) scheme, Export Promotion Capital Goods (EPCG) scheme; and duty-free imports for Exporters Scheme.
  • Under the various schemes, domestic companies are currently receiving billions in subsidies on an annual basis.
  • Withdrawing the subsidies may have a significant effect on the performance of such companies.

What lies ahead?

  • The WTO dispute settlement panel has asked India to withdraw the concerned export subsidy schemes within a time period of 90 days from the adoption of the report.
  • It also asked India to withdraw prohibited subsidies under the EOU/EHTP/BTP schemes, EPCG and MEIS, within a period of 120 days and SEZ scheme within 180 days.
  • India has a month to appeal against the WTO’s order.
  • However, India has the right to challenge the ruling before the appellate body of the WTO dispute settlement mechanism with regards to export subsidy schemes.
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