Canada fires fresh salvo at India's electronics subsidy at WTO amid trade dialogue reset

Mint

4 days ago

New Delhi: Canada has stepped up scrutiny of Indian subsidies for electronics and semiconductor production, submitting a fresh set of questions at the World Trade Organization (WTO) this month.
The latest round of queries focuses not only on central government schemes such as Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the expired North East Industrial Development Scheme, but also scrutinises state-level programmes such as Karnataka's New Industrial Policy (2020-25) and State Incentive Subsidy programmes, as per a WTO document reviewed by Mint.
The move comes at a time when New Delhi and Ottawa have begun talks on resuming bilateral trade negotiations after a period of frosty ties.
According to a WTO communication dated 21 July, Canada has sought further clarity on SPECS, particularly the product categories covered by it and the eligibility criteria that applicants must meet.
The queries come against the backdrop of India recording an exponential rise in exports of electronic goods to Canada—from $64.17 million in FY22 to $214.57 million in FY25, marking a jump of 235%, commerce ministry data showed.
India had earlier stated that electronic goods under this scheme are identified through Harmonized System of Nomenclature (HSN) codes, and that the eligibility requirements vary across sub-programmes.
In its new query, Canada has asked India to share the full list of relevant HSN codes and provide more detail on the eligibility norms, as per the WTO document.
"India is preparing to provide written responses to Canada's latest queries within the stipulated timeframe," said a government official who wished not to be named.
Earlier in April, Canada was one of three countries, along with the UK and the US, that questioned India's electronics manufacturing subsidy, which India defended as being consistent with WTO norms, arguing that the programmes aim to build domestic capacity in a critical sector and attract investments into electronic value chains.
Canada's questions are part of its ongoing review of India's 2021-2023 new and full subsidy notification to the WTO's Committee on Subsidies and Countervailing Measures.
"With industrial policy making a comeback, major economies are closely scrutinizing the subsidy schemes of other countries, and India is also facing similar scrutiny," said Abhijit Das, an international trade expert and former head of the Centre for WTO Studies, New Delhi.
In June, when Prime Minister Narendra Modi and Canadian Prime Minister Mark Carney met on the sidelines of the G7 Summit in Kananaskis, Canada, they agreed to revive the stalled trade talks between the two countries. The two leaders met for the first time since Carney took office following Canada's recent elections.
During the meeting, both sides underscored the need to resume negotiations on an Early Progress Trade Agreement (EPTA) and take it forward with the objective of concluding a broader Comprehensive Economic Partnership Agreement (CEPA), as per a press note issued by the Prime Minister's Office (PMO) on 18 June.
Trade between India and Canada stood at $8.4 billion in FY24, with India's exports at $3.85 billion and imports at $4.55 billion. In FY25, trade rose marginally to $8.77 billion, as exports increased to $4.22 billion while imports remained nearly flat at $4.55 billion, commerce ministry data showed.
Exports of electronic goods stood at $173.62 million in FY23, dipped slightly to $171.54 million in FY24, before rising sharply to $214.57 million in FY25.
Queries emailed to the ministries of commerce, electronics, and information technology remained unanswered till press time.
To promote domestic manufacturing of semiconductors and electronic components, the government has launched key subsidy schemes. The SPECS scheme offers 25% incentive on capital expenditure for setting up or expanding manufacturing units. The PLI scheme provides 4–6% incentives on incremental sales of mobile phones and specified components, attracting major global and Indian firms.
Launched in December 2021, the Semicon India Programme is a ₹76,000 crore initiative offering up to 50% fiscal support for semiconductor fabs, display fabs, OSAT units, and design-linked incentives for chip design startups.