What do you understand by industrial subsidies? Are they a better option for India in the face of global challenges?
India’s practical strategy should be based on five pillars.
First, an active subsidy monitoring cell should be established to keep track of import-dependent sectors, identify potential market distortions, and prepare credible evidence for trade-remedy measures. If products that India imports in large quantities are receiving government subsidies in their country of origin, immediate attention should be given to the issue.
Second, India should strategically prioritize sectors in which it has a competitive advantage and where economies of scale—benefits arising from large-scale production—can strengthen the economy and reinforce supply chains.
Third, public finances should be used to reduce fundamental constraints such as logistics costs, electricity expenses, land availability, and regulatory compliance burdens, rather than sustaining uncompetitive production through direct subsidies.
Fourth, support for Micro, Small, and Medium Enterprises (MSMEs) connected to global value chains should be expanded through credit guarantees, export financing, and assistance for technological upgradation.
Fifth, and most importantly, India should actively strengthen cooperation at the World Trade Organization (WTO) and other international forums with countries that share concerns about subsidy transparency and excess production capacity. This approach is more appropriate than engaging in a race of direct subsidies because it strengthens India’s fundamental economic foundations.
India cannot directly alter the domestic policies of its neighboring country, China. However, it can influence the broader international environment through coalition-building aimed at improving transparency, reporting standards, and subsidy discipline. India’s interest lies in advocating, through multilateral forums, for better disclosure of grants, tax concessions, concessional loans, and support provided through state-owned enterprises.
At the same time, India can deepen relations with partner countries facing similar market pressures. India already possesses several policy instruments to support businesses. The first is the use of trade-remedy measures such as anti-dumping duties, countervailing duties, safeguard actions, and close monitoring of import surges in sectors where subsidy-driven distortions are clearly visible.
The second area is infrastructure development. The government can increase support for logistics, reliable electricity supply, skill development, testing facilities, quality standards, and the adoption of advanced technologies.