India gathers data to counter US claims of excess capacity

What Happened

• India's Commerce Ministry is compiling detailed industry data — covering production volumes, employment figures, and policy support — to counter allegations raised in a US Section 301 probe launched in March 2026.
• The US Trade Representative (USTR) initiated investigations on March 11, 2026 targeting 16 economies including India, alleging "structural excess capacity and production" in manufacturing sectors that burden US commerce.
• India's sectors cited in the probe include solar modules, petrochemicals, steel, textiles, automotive goods, health, and construction.
• The US probe follows a broader pattern of using Section 301 as a trade policy tool under the Trump administration, alongside reciprocal tariff investigations and anti-dumping measures.
• India's data-gathering effort is intended to demonstrate that its manufacturing policies are developmental in nature and do not constitute unfair subsidisation that distorts global markets.
• A USTR public comment period for the investigation opened on March 17, 2026, with a hearing scheduled for May 5, 2026.

Static Topic Bridges

Section 301 of the US Trade Act, 1974

Section 301 of the Trade Act of 1974 (Title III, Sections 301-310) grants the Office of the United States Trade Representative (USTR) authority to investigate and impose remedies against foreign trade practices deemed unreasonable, discriminatory, or violative of US trade agreements. An investigation can be self-initiated by the USTR or triggered by petition from an industry group. USTR must initiate within 45 days of a petition. If an act or policy is found to be "unjustifiable" and burdens US commerce, action is mandatory; if "unreasonable or discriminatory," action is discretionary. Remedies include tariffs, withdrawal of trade concessions, or binding agreements with foreign governments. Section 301 has historically been used against China (notably the 2018 investigation that led to $300 billion in tariffs) and is now being revived against a broader set of economies including India.

Excess Capacity and Subsidisation: WTO Disciplines

Under WTO disciplines, industrial subsidies are governed by the Agreement on Subsidies and Countervailing Measures (ASCM). Subsidies are classified as prohibited (export subsidies, import substitution subsidies), actionable (causing adverse effects to other members), and non-actionable (de minimis or for R&D/regional/environmental purposes). The ASCM allows affected countries to impose countervailing duties after investigation if a subsidy causes material injury to domestic industry. The US Section 301 excess capacity probe is a unilateral action distinct from the WTO process — it allows the US to impose tariffs without going through WTO dispute settlement. India's position is that its industrial policies (such as PLI schemes, Make in India) are WTO-compatible developmental policies, not market-distorting subsidies.

India-US Trade Relations and the Bilateral Trade Agreement

India-US bilateral merchandise trade stands at over $130 billion annually, making the US India's largest trading partner. The two countries are simultaneously negotiating a Bilateral Trade Agreement (BTA), with an interim deal framework announced in February 2026 (reducing US reciprocal tariff on India to 18%). India has also been subject to US anti-dumping and countervailing duty investigations in steel, pharma, and solar sectors. The simultaneous pursuit of a BTA alongside the Section 301 probe reflects the complexity of the trade relationship — trade negotiations and trade enforcement actions run in parallel tracks. The probe's timing, amid BTA negotiations, raises questions about its use as a negotiating lever to extract concessions from India.

India's Steel and Petrochemicals Sector: Policy Context

India's steel sector is the world's second-largest and aims to reach 300 MT production capacity by 2030 (from ~125 MT in 2023-24). The National Steel Policy 2017 and incentives under the PLI Scheme for Specialty Steel support this expansion. Similarly, India's petrochemical industry is growing rapidly, with investments in projects like the Ratnagiri refinery complex and expansions at ONGC Petro Additions. The US alleges that state support for these sectors constitutes "excess capacity" that depresses global prices and burdens US producers. However, India's production is largely aimed at meeting domestic demand — steel demand is rising with infrastructure spending under PM Gati Shakti and the National Infrastructure Pipeline (₹111 lakh crore).

Key Facts & Data

• US USTR Section 301 investigation launched: March 11, 2026 — targeting 16 economies including India
• Other economies investigated: China, EU, Singapore, South Korea, Vietnam, Taiwan, Mexico, Japan, Indonesia, Malaysia, Cambodia, Thailand, Bangladesh, Norway, Switzerland
• India's sectors cited: solar modules, petrochemicals, steel, textiles, health, construction, automotive
• USTR public comment deadline: April 15, 2026; hearing: May 5, 2026
• Section 301 investigation timeline: determination within 12 months in cases not involving trade agreements
• US remedies possible: tariffs, trade concession withdrawal, binding agreements
• India-US bilateral merchandise trade: ~$130 billion annually
• India: world's 2nd largest steel producer; targeting 300 MT capacity by 2030