Trade Protectionism in India: Challenges and WTO Disputes

Introduction

Trade protectionist policies are those that are designed to prevent imports or to assist domestic Industries in other ways that restrict international trade, – for example through tariffs, intellectual property protections, subsidies or quotas. Historically, India implemented protectionist trade policies primarily to protect fledging industries and establish self-sufficiency. India’s position is complicated because of its economic structure with mass domestic economic interests reining against external obligations to trade/at international regulatory frontiers. While the World Trade Organization (WTO) controls the public nature of international trade practices, India’s politics on trade protectionism clashes with the WTO ideals on free trade and (fair) competition. This article analyses India’s trade protectionism measures, focused in particular on the WTO disputes case studies it has faced, the implications of those cases, particularly in the context of policy juxtaposed against the legal challenges brought to bear against India on trade protectionism.

India’s Trade Policy and Protectionism: An Overview

India’s trade policy has changed emphatically through time driven in part by domestic rationale and in part by international constraints. When the country’s trade policy began to evolve post-independence in 1947, India adopted a protectionist approach to protect domestic fledgling industries. The License Raj model of regulation characterized the period of heavy protectionism adopted by government which restricted imports and domestic industry. The government imposed high tariffs, instituted import licensing, and imposed quantitative restrictions to enable Indian industries to compete against foreign goods. It was considered absolutely necessary to grow the economy, embark on industrialization and be self-sufficient in critical sectors including textiles, automobiles, and agriculture.

The economic liberalization of the 1990s represented a significant shift in trade policy for India. The balance of payments crisis faced by the country led to a systematic set of economic reforms, overseen by then-Finance Minister Dr. Manmohan Singh. The reforms included a reducing tariffs, eliminating some restrictions on imports and putting into place frameworks that facilitated foreign investment. The processes of liberalization were given concrete impetus by India’s commitment to the World Trade Organization (WTO) founding in 1995. As part of its WTO membership, India accepted its policies to include liberal regulators and remove barriers to trade, and it is considered a process that would integrate India into the global economy.

Trade Protectionism in the Post-WTO Era

In spite of liberalizing trade, India has maintained aspects of protectionism in sectors such as, agriculture, steel, and solar energy. Protectionist measures are used to shield domestic industries from competition, to “protect jobs”, and to encourage industrial development. For instance, India’s agriculture is heavily subsidized since the government pays a Minimum Support Price (MSP) to farmers for certain crops so farmers are not adversely affected by international market price fluctuations. These subsidies have often been challenged by other WTO members, especially members of the Agreement on Agriculture, where they have argued that these price subsidies distort trade since they lead to pricing lower than competition from other exporters as it leads to increases in production.

In other sectors, for example in solar energy, India has introduced and allowed for domestic content requirements (DCR) in order to encourage the depreciation of solar panels and solar cells in India, rather than utilizing technology from abroad. One target of this policy was to reduce its dependence on foreign technology from China and Korea to develop India’s local manufacturing, but it opened up new challenges. It led trading partners (the United States for example) to challenge India’s DCR in regards to WTO rules relating to non-discrimination” and the General Agreement on Tariffs and Trade (GATT).

Current Protectionist Trends

Today ,India levies trade protectionism primarily to ensure protective support for its agriculture, to maintain its basic industries, such as steel and solar, and to preserve jobs in India. Using a litany of mechanisms, including anti-dumping duties, safeguard tariffs, and countervailing duties, the Government of India has mandated these measures to address the inequities in traded products and to not disadvantage a domestic producer, against foreign competition. In a major example, India, has imposed anti-dumping duties to discourage cheaply priced imports of steel from countries, such as China, to ensure that domestic producers are not overwhelmed with a deluge of cheap products to the detriment of the local producer.

Adding on to this, India’s Make in India initiative, started in 2014, was brought about by the need to bring manufacturing back to India and decrease the dependency of economies like India on imports. Therefore, this initiative has been the source of additional protectionism, with the intent of bringing foreign companies to produce in India while protecting the local community from imports that compete with domestic products.

The Conflict with WTO Rules

Even though the aims behind these protectionist policies are to protect the Indian economy and industries, there have often been conflicts with India’s WTO commitments, particularly with respect to subsidies, anti-dumping, and trade barriers. India’s trade protectionism has become the subject of several WTO dispute settlements where India’s trading partners have contested whether India’s subsidies on agricultural products are even legally permissible under the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the Anti-dumping Agreement.

One case that exemplifies this is the India – Agricultural Products case when India defended against complaints by the U.S. and other WTO Members about India’s subsidies on agricultural products. India justified the subsidies on important agricultural products by utilizing Minimum Support Prices (MSP): however, the subsidies were deemed excessive and caused trade distortions.

Case Analysis of India’s Trade Protectionism in WTO Disputes

India – Agricultural Products (WTO Case)

In 2014, the United States initiated a dispute with India at the WTO, asserting that India’s subsidization of agricultural products violates the Agreement on Agriculture. The United States contended that the Minimum Support Price (MSP) for agricultural products was above the allowed subsidy levels imposed as a part of its obligations to WTO. India argued that these subsidies could be justified for food security, and smallholder farmer protection. India argued that these subsidies could be justified for food security, and smallholder farmer protection.
The dispute raised important questions about balancing the rights to subsidize food security and maintain the rules of the WTO that impose duties on governments in order to limit distortions to trade. The WTO decided that India exceeded the allowed subsidy levels, and ordered India to take action. This case is a clear reminder of the tension between domestic regulatory requirements and international trade obligations. India has repeatedly asserted that the Agreement on Agriculture should provide developing countries with greater flexibility to ensure food security and ensure the viability of the agricultural sector.

India – Solar Cells (WTO Case)

In 2015, the United States challenged India’s Domestic Content Requirements (DCR) policy in the India – Solar Cells case. Due to developments in the solar market, India adopted rules, legally referred to as “policies”, that required businesses to use domestic solar cells and modules in all solar projects that receive government funding. In its finding, the WTO determined that the policies were inconsistent with the WTO’s rules governing discrimination, especially the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Investment Measures (TRIMs).

The WTO found that India’s DCR policies discriminated against foreign suppliers of solar equipment. The WTO ruled in favour of the United States, finding that India’s DCR provision was unconstitutional under WTO law because it discriminated against foreign suppliers of solar equipment. The ruling highlights the tension between certain national policy objectives – like promoting renewable energy – and the obligation to refrain from discriminating under international trade law.

In defence of its position, India suggested that it did not want to promote local industry for the reason of ensuring that India was not dependent on foreign technology in the essential field of clean energy.

India – Anti-Dumping Measures on Steel (WTO Case)

India has struggled with anti-dumping duties, especially in relation to steel. One significant threat came from a dispute between the European Union and Japan. They challenged India, because they had imposed anti-dumping duties on stainless steel while providing protectionist measures for their domestic industry. The WTO dispute settlement rules stated that India’s duties did not meet the requirements of the WTO Anti-Dumping Agreement and required India to withdraw or modify its duties. India’s efforts were a reflection of more general efforts insulate from international competitive pressures, particularly from the steel sector, and dumping countries like China.

Implications and Future Prospects for India’s Trade Protectionism

India’s historical experience of trade protectionism in this sense is likely limited by two objectives; policies aimed at protecting its domestic industries at the same time it remains compliant with global trade rules. In this sense, the WTO cases provide a mechanism for China to blunt claims, yet at the same time illustrate the challenges faced by a developing-state like India to balance its developmental ambitions with global trade commitments.

India appears to be pursuing a strategy of strategic protectionism, which aims for an optimal balance between developing domestic industries (for example, agriculture, steel, and renewable energy) while remaining socially accountable to fulfil international obligations depending on the sector. This indicates that India can discriminate against foreign competitors in certain sectors (for example, agriculture, steel, and renewable energy); while still liberalizing the services/information technology sectors.

In terms of trade protectionism, India will likely pursue a path that uses more refined protectionism measures (e.g., selective tariff measures and import restrictions) that work collectively and systematically to recognize particular sectors as necessary for economic growth and development. Furthermore, India will need to remain engaged with international bodies so it can avoid trade disputes with other countries and avoid the risk of inciting retaliatory action from other states if it over aggressively pursues stated objectives.

Conclusion

In India’s case, protectionism in trade policy has been a double-edged sword: fostering domestic industry and allowing self-sufficiency, while at the same time being a source of many trade-related disputes under the World Trade Organization (WTO) umbrella. As India becomes more integrated into the global economy, it will need to reconcile, maintain, or evolve national interests while opposing liberal, rules-based trade solutions.

By surveying India’s disputes at the WTO, we have hopefully shown the confusion, complexity, contradictions and dangers of domestic trade policies that simply do not align with international trade policies. The case studies indicate that India will need to constantly adapt its trade policies to develop, while keeping in mind both economic imperatives and obligations to international treaties, and to further manage any and all risks related to trade protectionism.

Bibliography (OSCOLA Format)

International Agreements and Legal Instruments

• World Trade Organization, Agreement on Agriculture (adopted 15 April 1994, entered into force 1 January 1995) Marrakesh Agreement Establishing the World Trade Organization, Annex 1A.
• World Trade Organization, Agreement on Subsidies and Countervailing Measures (adopted 15 April 1994, entered into force 1 January 1995) Marrakesh Agreement Establishing the World Trade Organization, Annex 1A.
• World Trade Organization, Agreement on Trade-Related Investment Measures (TRIMs) (adopted 15 April 1994, entered into force 1 January 1995) Marrakesh Agreement Establishing the World Trade Organization, Annex 1A.
• General Agreement on Tariffs and Trade (GATT) 1994.

WTO Dispute Settlement Cases

• India — Measures Concerning the Importation of Certain Agricultural Products (Complaint by the United States) WT/DS430/R, Panel Report (14 October 2014).
• India — Certain Measures Relating to Solar Cells and Solar Modules (Complaint by the United States) WT/DS456/R, Panel Report (24 February 2016).
• India — Anti-Dumping Measures on Certain Products from the European Union (Complaint by the European Union) WT/DS518, Dispute Settlement Proceedings.

Government and Policy Documents

• Government of India, Make in India (launched 2014) https://www.makeinindia.com accessed 11 May 2025.