Author : Dhani Mehrishi
India’s solar industrial policy has helped build a credible alternative to China, but mounting US trade barriers and China’s WTO challenge are testing whether global trade rules allow supply-chain diversification to succeed
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In September 2025, India’s trade authority imposed a 30 percent anti-dumping duty on Chinese solar cells, well below the actual dumping margin of 105–115 percent, with the intent to protect domestic manufacturers while avoiding disruption to the broader sector. Six months later, the United States imposed a 123 percent anti-dumping duty on Indian solar cells, an industry India had built through its Production Linked Incentive (PLI) scheme, ALMM framework, and tariff policies. In December 2025, China initiated a World Trade Organization (WTO) dispute over those same Indian policies, leaving India caught between two fronts. The real question may be less about India’s compliance and more about how much policy space developing economies retain within WTO rules, given that China’s challenge leaves the WTO consistency of India’s measures contested. Advanced economies use industrial policy freely. Developing nations that emulate these policies face penalties.
Advanced economies use industrial policy freely. Developing nations that emulate these policies face penalties.
The global solar energy transition rests on one critical chokepoint: China currently accounts for over 80 percent of solar panel manufacturing, a share projected to reach 95 percent for key components. Both the International Energy Agency (IEA) and Wood Mackenzie identify this concentration as a risk and have called on countries to diversify their solar supply chains and build domestic manufacturing capacity. India has sought to address this vulnerability by building a domestic solar manufacturing base through policies designed to comply with WTO rules. That effort is now under pressure from both sides: China is challenging these policies at the WTO, while the United States is closing its markets to Indian solar products
In April 2026, the US Department of Commerce announced a 123.04 percent duty on Indian solar cells and panels, with named Indian exporters as beneficiaries, including Mundra Solar PV, Premier Energies Photovoltaic, Mundra Solar Energy and Kowa Company. A separate WTO dispute filed by China contests India’s solar subsidies, tariffs, and domestic procurement requirements. Together, these actions place commercial and legal pressure on what PV Magazine recognises as potentially the only credible large-scale alternative to Chinese solar supply.
India’s approach to solar manufacturing is not a patchwork of protections. It is a layered policy architecture in which each instrument addresses a specific market failure, with tariff exposure, supply-side underinvestment, demand fragmentation, and below-cost import competition addressed by distinct but interlocking measures.
Source: Compiled by author
An investigation by India’s Directorate General of Trade Remedies found an injury margin of 35–40 percent, yet recommended only a 30 percent anti-dumping duty on Chinese solar cells for three years. This is in line with the WTO lesser duty rule under Article 9, which affirms the desirability of imposing duties below the dumping margin but adequate to remove injury, and Article 9.3, which bars duties from exceeding the dumping margin calculated during the investigation. The DGTR also confirmed that India’s solar industry had secured 38.1 GW of new capacity by the end of 2025, rising to 64.6 GW by June 2026, achieving a self-sufficiency rate of 140 percent against annual domestic demand of 44 GW. India’s anti-dumping duty and the lesser duty approach both have explicit grounding in WTO rules.
Pressure on India’s framework appears from two directions. The United States has levied duties exceeding 234 percent on Indian solar exports, effectively closing its market. China initiated WTO consultations regarding India’s tariff practices on 19 December 2025, claiming that they were inconsistent with GATT Articles II:1(a) and II:1(b), which govern bound tariff rates and their application. After consultations failed, China requested a dispute settlement panel; India blocked the request at the Dispute Settlement Body.
The difference in scale is stark. JCT estimates that Section 45X credits will total US$72.7 billion over five years, against India’s PLI solar outlay of US$2.9 billion. It is India’s smaller incentive that attracted countervailing duty action. The April 2026 preliminary anti-dumping duty of 123.04 percent, combined with countervailing duties of approximately 125.87 percent imposed in February 2026, makes Indian solar exports to the US commercially unviable. Both measures respond to government-supported production. India’s September 2025 anti-dumping duty was a WTO-compliant response to documented below-cost imports from a state-backed industry. The mechanism is identical. The exposure is not.
The timeline is defined. The US Department of Commerce’s final anti-dumping and countervailing duty determinations are scheduled for 13 July 2026, with the International Trade Commission’s (ITC) final injury determination due on 19 October and orders following on 26 October. Two tracks matter before that window closes.
I. India–US Trade Agreement: A Path Beyond Solar Duties
The United States and India announced an interim bilateral trade agreement in February 2026, initiating broader bilateral trade agreement (BTA) negotiations covering both trade remedies and non-tariff barriers. A completed BTA could remove the existing anti-dumping and countervailing duty (AD/CVD) measures. India should prioritise solar manufacturing in the negotiations and seek safeguards for output-linked incentives such as the PLI scheme. With the final duty determination still pending, this offers a viable exit route and gives US solar developers, who face higher costs from the duties, a stake in a negotiated resolution.
II. SCM Agreement: Building a Shared Position
India, Indonesia, and Laos face the same AD/CVD investigations simultaneously and share a common interest in advancing one argument before the WTO Dispute Settlement Body (DSB): under the SCM Agreement,, output-linked production incentives are actionable, not prohibited.
This is not primarily a litigation strategy. It is a record-building exercise aimed at shaping how the next generation of clean energy subsidy disputes gets framed.
Across both tracks, India’s core factual position is the same: the global energy transition requires a diversified solar supply chain, and India is building one. The Union Budget 2026-27 proposed a special one-time measure allowing eligible Special Economic Zone (SEZ) manufacturing units to sell a prescribed proportion of their output into the domestic tariff area at concessional duty rates, a step the National Solar Energy Federation described as reducing dependence on any single export destination. That reorientation is prudent regardless of how the trade remedies resolve, but it cannot substitute for the multilateral argument. If the combined effect of US and Chinese trade action is to commercially constrain the only credible alternative solar supply chain under development, the question is no longer whether India’s measures were WTO-compliant. The question is whether the rules-based trading system is capable of allowing supply chain diversification to happen at all. With bilateral negotiations underway and two parallel legal challenges in motion, this is the only point at which that argument carries genuine strategic leverage.
India’s solar policy shows how a calibrated mix of tariffs, production incentives, procurement rules and trade remedies can build domestic capacity and reduce dependence on China. Yet pressure from the US and China highlights the constraints developing economies face when pursuing industrial policy within the rules-based trading system. India’s experience therefore raises a broader question: can global trade rules accommodate efforts to build resilient and diversified clean-energy supply chains? Preserving policy space for such industrial development will be essential if the global energy transition is to become more geographically diverse and resilient.
Dhani Mehrishi is a Research Intern at the Observer Research Foundation.
The author acknowledges the use of Claude Sonnet 4.6 for preliminary research assistance during the preparation of this piece.
Dhani Mehrishi is a Research Intern at the Observer Research Foundation. …
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