Quality Control and India’s Manufacturing Growth, Pg6

Key Highlights:

• India's Quality Control Orders (QCOs), which expanded significantly post-2019, faced scrutiny at the WTO's eighth Trade Policy Review in July 2026 from major trading partners and BRICS members.
• The number of products under QCOs grew from 88 in 2019 to 765 by December 2024, but the pace slowed in late 2025 due to concerns over supply chain disruptions and input costs.
• The government introduced the Transition Facilitation (Quality Control) Order, 2026, on June 25, 2026, to ease regulatory bottlenecks for eligible firms.
• This new order, notified by the Department for Promotion of Industry and Internal Trade (DPIIT), allows temporary sourcing from BIS Scheme-II licensed suppliers for specific sectors like toys and footwear.
• A recent CSEP study found that QCOs on chemical inputs increased production for large firms but reduced their Gross Value Added (GVA) by 37%, while small firms experienced a 47.6% decline in profitability.

Detailed Insights:

• The reassessment of QCOs is crucial for India to integrate into global value chains and enhance manufacturing competitiveness.
• Concerns about QCOs as non-tariff barriers were raised by the EU, US, Brazil, China, and Indonesia at the WTO review.
• The initial rapid expansion of QCOs aimed to ensure product quality and consumer safety, and to boost domestic manufacturing.
• The government's shift in approach involved revoking or suspending some QCOs, especially for intermediate goods, to address issues of input availability and costs.
• The Transition Facilitation (Quality Control) Order, 2026, provides a risk-based compliance framework for a smooth transition without compromising quality.
• This order applies to products under ten existing QCOs and allows eligible companies to obtain temporary permission to source from BIS Scheme-II licensed manufacturers.
• An Implementation Committee, chaired by DPIIT and including representatives from BIS and other ministries, assesses applications for this transition mechanism.
• Over 600 QCO-covered products, including critical intermediate inputs in sectors like chemicals, steel, and electronics, still require reassessment.
• The CSEP study highlighted that QCOs disproportionately burden Micro, Small and Medium Enterprises (MSMEs) due to higher compliance costs and limited ability to absorb rising input costs.
• For larger firms, while production increased, the decline in GVA suggests higher input costs were passed on through increased output prices rather than improved efficiency.
• The findings emphasize that supply chain implications must be integral to the design and reassessment of QCOs.
• Achieving the ambition of Viksit Bharat 2047 requires quality standards that promote scale, efficiency, and competitiveness in manufacturing.

Key Concepts Involved:

• Quality Control Order (QCO): Mandatory technical regulations requiring products to comply with designated Indian Standards for manufacturing, import, sale, or storage.
• Bureau of Indian Standards (BIS): India's national standards body responsible for the harmonious development of standardization, marking, and quality certification of goods.
• Global Value Chains (GVCs): International production networks where different stages of a product's creation occur in various countries.
• Micro, Small and Medium Enterprises (MSMEs): Enterprises classified based on investment in plant and machinery/equipment and turnover, crucial for economic growth and employment.