With China holding fort both in the traditional manufactured goods and in modern hi-tech chip-based industries, robots and electric vehicles, the rich world finds the going tough in maintaining its earlier lead. The West feels both enfeebled and impoverished from its pole position it enjoyed! China’s stupendous success, breath-taking infrastructure, neck-bending skyscrapers and mind-boggling development with the seamy sides of life well-hidden always elicited the scorn of the United States, its major rival as it claims to be the bastion of liberal democracy of the free world. The rest of the universe, including India, take obvious glee in the absolute lack of political freedom and denial of free thought to ordinary denizen as they could never recompense all the glitz and glamour of the Middle Kingdom!
Be that as it may, it is no rocket science that China heavily subsidised its manufacturing powerhouse from Deng Xiaoping’s first flush of reforms in the late 1970s till today as the State is the arbiter of resources allocation with no question asked. Interestingly, the Paris-based inter-governmental think tank, the Organisation for Economic Cooperation and Development (OECD) has come out with a blunt statement in a provocative report that industrial subsidies reach highest levels in 2024 among all its members! It said subsidies across 15 key industrial sectors peaked relative to revenue since the 2008-09 global financial crisis.
The OECD MAGIC Database of Industrial Subsidies, providing a synoptic picture of a firm-level view of industrial subsidies, offers a fresh insight into how they shape global trade flows. It tracks subsidies received by 525 of the world’s largest industrial firms between 2005-2024, covering government grants, tax concessions and below-market finance extended to firms across regions and sectors. Aggregate subsidies across 15 key industries reached 1.3 per cent of firm revenue, totalling $108 billion in 2024. This was the second highest level relative to revenue on record after a peak in 2009.
The report, discussed at the OECD ministerial council meeting on June 3 under the rubric of ‘getting industrial policies right for open markets, growth and prosperity’, argued firms in China continued to get significantly higher support than their competitors elsewhere, even as subsidy levels rose across most regions surveyed. OECD’s findings have come at a time of escalating trade tensions between Beijing and competitive economies over the burgeoning glut of industrial goods, both modern and traditional in the markets. They include chemicals and raw materials too that edged out rival industrial groups out of business elsewhere.
Succinctly but tellingly OECD hoisted the red signal that ‘large and persistent industrial subsidies can distort global markets, creating unfair competitive advantages and contributing to excess supply capacity’. With US President Donald Trump weaponising tariff to punitive level, the OECD findings might spur strident demands in the sclerotic Europe and in the US to take stolid steps to defend manufacturers through enhanced tariffs and import quotas, with the moribund WTO and its dysfunctional dispute settlement body in limbo!
OECD analysis confirms Chinese aerospace companies gained from subsidies two to five times bigger than those obtained by OECD-based rivals in 2024, when calculated as a share of revenue; in semiconductors, the average global subsidy was calculated at just over two per cent of company revenue, while for companies based in China, subsidies reached nearly 10 per cent of their revenue in 2021 and 2022.
For India with manufacturing segment remaining its Achilles’ heels for far too long, despite many attempts to help private sector to take risk and enter into frontier areas apart from the traditional manufacturing, the dream of Viksit Bharat would remain distant unless drastic measures are put in place to rev up the industrial engine in full blast. In recent years, besides bringing down the corporate tax rate for new firms to a competitive level, the government also did rate rationalisation of the goods and services tax (GST) and slashed down on import duties on inputs and intermediate goods in sectors such as automobiles and electronics in a bid to reduce costs and improve competitiveness for the domestic players.
Even as the OECD is exercised over subsidy being bestowed on industrial goods among its members and most flagrantly in China through various spurs including the funneling of low-cost funds, India need not unduly worry over any scheme it has announced or up its sleeve. Presumably so, as its capacity to dole out subsidy for industry cannot outrun its subsidy on welfare for various pro-poor schemes and to middle and lower middle-class need to get their demand met even to a limited extent.
In India, the Production-Linked Incentive (PLI) scheme was launched for 14 key sectors with a humongous outlay of Rs 1.97 lakh crore to goad incremental production and sales, facilitating thereby investments in identified segments and promoting expansion of manufacturing capacities. Government told Lok Sabha in a written response on February 10, 2026 the schemes have generated actual investments surpassing Rs 2 lakh crores as on end-September 2025.
Ultimately, all it boils down is to keep the high-cost economy a bit manageable through low-cost finance for the private industry players, besides ensuring that ease of doing business locally is made easier and not messy by slashing down the thickets in the terrain, policy wonks say.
(G Srinivasan is a senior economic journalist based in New Delhi.)
