A World Trade Organization Panel has recommended that India withdraw the "prohibited subsidies" on exports within 90-180 days as they are 'in violation of WTO rules'.
The dispute panel was hearing the US complaint about India's alleged export subsidy measures and found the export promotion schemes in violation of WTO rules.
These schemes include the Merchandise Exports from India Scheme (MEIS); Export Oriented Units Scheme and related sector-specific schemes (EOU); Special Economic Zones (SEZ); Export Promotion Capital Goods Scheme (EPCG); and a duty-free imports for exporters programme (DFIS).
The US has won the case against India which have led to the WTO panel recommendations. US filed the case in March 2018, challenging the 'illegal export subsidies provided to Indian firms'.
According to the USTR, the WTO dispute panel agreed with the US that India provides prohibited subsidies to exporters worth over $7 billion annually.
"... India gives prohibited subsidies to producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel, to the detriment of American workers and manufacturers," the USTR said in a statement.
A USTR release said that Export subsidies provide an unfair competitive advantage to recipients, and WTO rules expressly prohibit them.
A limited exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark. India was initially within this group, but it surpassed the benchmark in 2015.
India's exemption has expired, but India has not withdrawn its export subsidies, the release said.
The US government cancelled India's preferential access to the US market earlier this year. Both sides have since been involved in stop-start negotiations which have not reaped much good. During PM Modi's recent visit to the US, he met with President Trump several times but a trade deal could not be signed.
Meanwhile, India continues to negotiate terms with China and Southeast Asian nations over a new regional comprehensive economic partnership.