WTO nations query India’s PLI, QCO, import substitution, New Delhi says public policy objectives key
India's 8th Trade Policy Review (TPR) at the World Trade Organization was held on 21 and 23 July 2026, covering the trade policy period from 2021 to 2025.
WTO member countries submitted more than 900 questions on India's trade and investment regime, with repeated concerns raised about Quality Control Orders (QCOs), Production Linked Incentive (PLI) schemes, and import-substitution measures.
Several members argued that an expanding number of QCOs impose conformity-assessment requirements that deviate from internationally agreed standards, functioning as non-tariff barriers.
India's response defended these measures as necessary for public policy objectives — consumer safety, quality assurance, and reduction of import dependence in strategic sectors.
Agricultural support schemes were also flagged for scrutiny during the review, alongside calls for greater transparency and predictability in India's trade practices.
WTO Trade Policy Review Mechanism (TPRM)
The TPRM is a permanent surveillance mechanism under the WTO, established as an integral part of the WTO system by Annex 3 of the Marrakesh Agreement (1994). Its objective is not to enforce specific obligations but to achieve greater transparency in, and understanding of, members' trade policies, thereby encouraging adherence to multilateral trade rules.
Key Details
- Review frequency is tied to a member's share of world trade: the four largest traders (EU, US, China, Japan) are reviewed every 3 years, the next 16 largest every 5 years, and all other members every 7 years.
- Reviews are based on two reports — a policy statement by the member under review and an independent report prepared by the WTO Secretariat.
- The mechanism does not create new substantive obligations; it is a peer-review/transparency exercise, distinct from the WTO's binding Dispute Settlement Understanding (DSU).
India's 8th TPR (2026) is the periodic transparency exercise through which other members formally question India's trade-distorting measures such as PLI and QCOs, without this amounting to a legal dispute.
Production Linked Incentive (PLI) Scheme
The PLI scheme is a fiscal incentive programme under which the Government of India pays incremental production-linked cash incentives to eligible manufacturers, aimed at boosting domestic manufacturing capacity, integrating India into global value chains, and reducing import dependence, in line with the Atmanirbhar Bharat initiative.
Key Details
- First notified in 2020 for large-scale electronics manufacturing; extended to a total of 14 sectors (including electronics, pharmaceuticals, telecom, textiles, automobiles, and specialty steel) by late 2022.
- Combined outlay across the 14 sectoral schemes is approximately ₹1.97 lakh crore.
- Each sectoral scheme is notified and administered by the concerned line ministry/department.
Because PLI incentives are tied to incremental domestic production and, in several sectoral variants, to import-substitution and local sourcing targets, other WTO members view them as trade-distorting and have questioned their compatibility with WTO subsidy disciplines.
Quality Control Orders (QCOs) under the BIS Act, 2016
QCOs are notifications issued by central line ministries making compliance with specified Indian Standards mandatory for particular products, administered by the Bureau of Indian Standards (BIS).
Key Details
- Legal basis: Section 16 of the Bureau of Indian Standards Act, 2016, which empowers the central government to mandate a BIS Standard Mark "in public interest," for protection of human, animal or plant health, environmental safety, prevention of unfair trade practices, or national security.
- Once a QCO takes effect, a product cannot be manufactured, imported, distributed, sold, or stored without a valid BIS licence/certification bearing the Standard Mark.
- Violation attracts imprisonment, fine, or both under the BIS Act, 2016.
- The number of products covered by QCOs has expanded sharply in recent years across sectors such as steel, chemicals, electronics, and toys.
The EU and other WTO members specifically cited the rapid proliferation of QCOs as a concern, arguing that domestic-standard-based conformity requirements can act as barriers to imported raw materials and finished goods.
WTO Agreement on Subsidies and Countervailing Measures (SCM) — Import-Substitution Subsidies
The SCM Agreement disciplines subsidies among WTO members. Article 3.1(b) prohibits subsidies contingent, whether solely or as one of several conditions, upon the use of domestic over imported goods — commonly termed "import-substitution subsidies" or local-content subsidies.
Key Details
- Article 3 prohibits two categories of subsidies: export-contingent subsidies (3.1(a)) and import-substitution/local-content subsidies (3.1(b)).
- Developing-country members were originally given a transition period (5 years; 8 years for LDCs) to phase out pre-existing import-substitution subsidies from the SCM Agreement's entry into force (1995) — a window that has since lapsed.
- China has separately filed a WTO complaint alleging that certain Indian PLI-linked measures constitute prohibited import-substitution subsidies.
The SCM Agreement's Article 3.1(b) is the specific legal hook WTO members invoke when questioning whether India's import-substitution framing of PLI and related schemes crosses into prohibited-subsidy territory.
- India's 8th WTO Trade Policy Review: held 21 and 23 July 2026, covering the 2021–2025 period
- Over 900 questions submitted by WTO members ahead of/during the review
- PLI scheme: 14 sectors, ~₹1.97 lakh crore combined outlay, first notified 2020
- Legal basis for QCOs: Section 16, BIS Act, 2016
- SCM Agreement Article 3.1(b): prohibits import-substitution (local-content) subsidies
- TPRM legal basis: Annex 3 of the Marrakesh Agreement establishing the WTO (1994)
- Four largest WTO traders (EU, US, China, Japan) reviewed every 3 years under the TPRM