Costlier inputs, slower exports: How QCOs backfired on MSMEs, exporters, Pg17.

Key Highlights:

• A Niti Aayog report reveals that Quality Control Orders (QCOs), intended to improve product quality, have increased input costs and caused production delays for MSMEs.
• QCOs primarily target raw materials and intermediate products, with quality standards not always aligned with global benchmarks.
• A CSEP report indicates that imports fell by 13% in the year following a QCO notification and by 24% long-term.
• Exports initially rose by 10.6% but declined by 12.6% in the second year, showing no long-term export gains.

Detailed Insights:

• Quality control norms have negatively impacted export-intensive sectors like footwear and electronics, which employ approximately 4.5 million people.
• The implementation of QCOs has led to increased market concentration among domestic suppliers, allowing them to inflate prices above global levels.
• MSMEs face disproportionate compliance burdens, including certification costs of Rs 10,000-Rs 15,000 per consignment and significant approval delays.
• QCOs on intermediate products have disrupted access to materials not produced in India or manufactured by few suppliers, affecting design flexibility.
• The imposition of quality norms on intermediate products has reduced cost competitiveness for downstream manufacturers.

Key Concepts Involved:

• Quality Control Orders (QCOs): Legal directives mandating products to meet specific standards under the BIS Act.
• MSMEs: Micro, Small, and Medium Enterprises, vital for economic growth and employment.
• Bureau of Indian Standards Act: Indian law establishing standards for goods to ensure quality and safety.