India evaluating US’ green subsidy package to seek level playing field for its exports

NEW DELHI - India is evaluating the US’ green subsidy package—which offers over $400 billion worth of tax incentives, grants, and loan incentives to domestic manufacturers of green technology products—and examining possible arrangements that could be entered into with Washington to make Indian exports of similar itemscheaperandcreatealevelplayingfield,accordingto officials.Thegreensubsidies,beingprovidedundertheUS Inflation Reduction Act (IRA) signed in August 2022, are expected to benefit local manufacturers in a range of sectors, including clean electricity and transmission, and cleantransportation,suchaselectricvehicles(Evs).

“The Government has convened a study to look at the sectorsthatstandtobenefitintheUSunderIRAandshortlistproductswhereIndiacouldseekfavourabletreatment. IndustrybodiesarealsobeingconsultedbytheCommerce Department for their comments and suggestions,” an officialtrackingthemattersaid.

While India has to argue against the favourable treatment for domestic producers under the IRA on the basisofWTOprinciples,assomesubsidiesaredependent on the use of domestic goods and domestic production, bilaterally too it needs to be seen if a compromise can be workedout,theofficialsaid.

Bilateraldiscussions

“IftheUS’objectiveistocontrolinflationanditistrying to give subsidies to make certain domestically manufactured items cheaper, then the same logic should apply for imports. Inflation reduction should go both ways. How that can be done needs to be worked out. We have already started some discussions bilaterally, but we will firmupourargumentsandnegotiateoncetheimplications of the IRA are more clear in terms of product coverage,” theofficialsaid.TheEUwasoneofthefirstWTOmembers to raise concerns about the IRA and its impact on competitors from the EU in the subsidised sectors, including automotives. It is also in bilateral talks with the USonthematter.

Last month, the EU announced its intention to put forwardanewNet-Zero IndustryAct,whichsomeexperts say is in response to the IRA. “The aim will be to focus investment on strategic projects along the entire supply chain. We will especially look at how to simplify and fasttrack permitting for new clean tech production sites,” accordingtoEuropeanCommissionPresident,Ursulavon derLeyen.

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