US and China Challenge Modi's Make in India Incentives

06 Mar 2026 CW Team

Both Washington and Beijing contended that the incentives could distort markets and provide unfair advantage to certain firms, and they have sought deliberations in international trade fora. The disputes reportedly focus on eligibility criteria, fiscal support and the potential for preference that might affect foreign suppliers. The actions could involve formal reviews or requests for information under customary dispute settlement procedures. Observers noted that parallel challenges from two major economies underline the geopolitical sensitivity of industrial policy.

The Government of India defended the incentives as measures intended to attract investment, create jobs and foster technology transfer within the country, and it maintained that the schemes were consistent with development objectives. Officials argued that the incentives were structured to be open to a range of investors and to comply with global obligations while supporting domestic capacity building. New Delhi indicated readiness to engage with critics through dialogue and technical exchanges to address concerns without abandoning core policy goals.

The contestation may prompt revisions to programme design or greater transparency in administration to satisfy trading partners while preserving policy intent. Analysts expected protracted consultations that could lead to tailored adjustments rather than wholesale reversal of incentives. Domestic industry representatives signalled that any adjustments would be calibrated to protect nascent manufacturers and preserve employment while ensuring compliance with international obligations, and officials anticipated sustained bilateral discussions to find pragmatic solutions. Policymakers will face the task of reconciling industrial ambition with evolving norms of international trade.

The United States (US) and China have challenged Prime Minister Narendra Modi's Make in India programme by contesting factory incentive schemes offered to domestic manufacturers. The challenges were lodged amid growing scrutiny of state supported industrial policies and their impact on international competition. The development has elevated concern in New Delhi about balancing industrial growth with external trade pressures. Both Washington and Beijing contended that the incentives could distort markets and provide unfair advantage to certain firms, and they have sought deliberations in international trade fora. The disputes reportedly focus on eligibility criteria, fiscal support and the potential for preference that might affect foreign suppliers. The actions could involve formal reviews or requests for information under customary dispute settlement procedures. Observers noted that parallel challenges from two major economies underline the geopolitical sensitivity of industrial policy. The Government of India defended the incentives as measures intended to attract investment, create jobs and foster technology transfer within the country, and it maintained that the schemes were consistent with development objectives. Officials argued that the incentives were structured to be open to a range of investors and to comply with global obligations while supporting domestic capacity building. New Delhi indicated readiness to engage with critics through dialogue and technical exchanges to address concerns without abandoning core policy goals. The contestation may prompt revisions to programme design or greater transparency in administration to satisfy trading partners while preserving policy intent. Analysts expected protracted consultations that could lead to tailored adjustments rather than wholesale reversal of incentives. Domestic industry representatives signalled that any adjustments would be calibrated to protect nascent manufacturers and preserve employment while ensuring compliance with international obligations, and officials anticipated sustained bilateral discussions to find pragmatic solutions. Policymakers will face the task of reconciling industrial ambition with evolving norms of international trade.

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