Textile and steel overcapacity: India rejects claims amid USTR Section 301 probe

India rejected claims of surplus capacity in textiles and steel on Wednesday. Officials said domestic use of both products stays low per person. The response came after a US trade probe raised concerns. India argued that low consumption undercuts allegations of structural excess capacity and related exports.

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The issue gained attention after the Office of the United States Trade Representative began a Section 301b probe in March. The probe covers 16 economies, including India. It looks at "structural excess capacity and production\" in manufacturing. The USTR said some countries may be exporting excess supply problems to America.

USTR probe and India surplus capacity response

Director General of Trade Remedies and Additional Secretary Amitabh Kumar said the idea was new. Kumar told reporters that overcapacity is not addressed in WTO trade remedy rules. Kumar said, \"overcapacity has not come under any of the trade remedial laws in the WTO World Trade Organization framework and it is a new narrative. And of course, the objective is to target a particular country. We do not think we have overcapacity in the textiles sector. Our per capita consumption of all kinds of textile products is abysmal, particularly in manmade fibre and technical textiles. Ours is a hot, tropical climate; we wear cotton. How do we have overcapacity?. In steel also, our per capita consumption is so low. We have one of the lowest; we may be the second largest producer of steel, but compared to our population, our economic and growth imperative, its one of the lowest, he told reporters here.\"

India’s submission also rejected the USTR’s basis for the allegation. It said the notice did not give clear reasoning. It also said there was no prima facie evidence of structural excess capacity. India added that the USTR linked the claim to a trade surplus. India said that link was not supported by the notice.

Textiles surplus capacity claims and per capita fibre use

India said per capita fibre use is 5.5 kg at present. It said per capita MMF use is only 3.1 kg. Officials said this is among the lowest levels worldwide. India said it is even below Africa on MMF use. India also noted it is a net importer of manmade fibres, besides cotton.

Steel surplus capacity claims, per capita demand, and UK quotas

India said per capita steel use crossed 100 kg last year. It said this showed a structural shift in industrial development. Still, it remains below the global average of over 200 kg. India also cited China’s per capita steel use of over 600 kg. Experts said US tariffs on China encouraged steel dumping elsewhere.

Steel has also become an issue in India-UK trade talks. A UK steel measure has been a sticking point for implementing the India-UK free trade agreement. From July 1, 2026, the UK will limit tariff-free steel imports. Overall quota volumes will fall by 60 per cent versus the steel safeguard measure. Imports above quotas will face a 50 per cent tariff.

Kumar said trade remedy tools matter for handling unfair trade. Kumar said such measures can support domestic manufacturing and back rules-based trade. India’s position rests on consumption and import data for fibres. India also pointed to steel demand that remains low per person despite rising output and use.

With inputs from PTI