New Delhi, Oct. 28 -- China has initiated a World Trade Organization (WTO) dispute over India's subsidies for electric vehicles (EVs), alleging that these are "prohibited subsidies." Countries across the globe are resurrecting industrial policies focused on self-reliance in manufacturing. Subsidies for domestic manufacturing are integral to such policies. Trade pacts, whether free trade agreements (FTAs) or those under the WTO, lay out two subsidy categories:

Prohibited subsidies: Those that are contingent on: (a) the use of domestic over exported products, or on (b) export performance. These are frowned upon as having a distortive impact on trade and can be challenged as illegal.

Actionable subsidies: These are directed at domestic pro...