QCOs meant to help firms match global standards end up hurting some

The number of Quality Control Orders has seen a quantum jump since 2019, but many of them have ended up unintentionally hurting, instead of helping, industry

More than 70 years ago during a Parliament debate on protection given against import of soda ash to domestic glass manufacturers, Prof Meghnad Saha had argued that duties on intermediates had harmed domestic production. The eminent scientist's lengthy intervention in the Lok Sabha is worth a read today, especially in the context of India’s episodic efforts to offer similar protections to large local manufacturers, albeit through other means such as quality control.

 

More recently, the problem has been delineated in a recent paper written by Prerna Prabhakar, Fellow at the Centre for Social and Economic Progress. The September 2025 paper 'Decoding India’s Quality Control Orders' shows how the protectionist sentiment has been sharpened through a new instrument: Quality Control Orders or QCO. Between 2019 and 2024, the number of such QCOs surged from 88 to 765 — a more than eightfold increase, and "the upward trend continues”, the paper notes. As of August 2025, an additional 100 QCOs are in the pipeline.

 

What makes Prabhakar's analysis particularly interesting is that almost three-quarters of a century later, it is still intermediate goods like soda ash of yore that face the brunt of these QCOs. “Intermediate goods face the steepest decline: QCOs lead to a 16 per cent reduction in imports in the year of notification and a 17.5 per cent decline in the subsequent year, and by 30 per cent over the long term,” the paper notes.

 

The government, through its Production Linked Incentive (PLI) scheme in fourteen sectors has sought to protect local industry against an onslaught of finished goods, such as by raising import duties on products like cellphones, solar modules, and drones. The objective is to let the volume of local production expand under the benign shadow of these protections. The spin-offs in terms of added investment and employment is easy to discern. This is not to say India is the only one doing this; large swathes of advanced economies are also walking the same route, the latest being the US with its sweeping tariff walls.

 

Unintended consequences

 

What Prabhakar’s paper shows is a different trend. QCOs are now being used to block imports of intermediate goods, including those which could have been used to expand local production. Thus, the results on domestic production, ironically, are the reverse of what QCOs were expected to achieve. The blocking of these imports critical to domestic production has not raised export performance, preventing India from going deeper into the global supply chain.

 

The policy rationale behind the QCOs was actually quite different, and aimed at boosting the credibility of Indian goods in global markets. A government release points out that while there are 22,689 Indian standards in force, more than half do not correspond to the global ISO (International Organisation for Standardisation)/IEC (International Electrotechnical Commission) standards. The predominant reason for the issue of these orders, the release points out, are “based on considerations like public interest, protection of human, animal or plant health, safety of environment, prevention of unfair trade practices and national security”.

 

The CSEP paper agrees on this point. “QCOs have been introduced to build a robust manufacturing ecosystem and ensure the quality of both domestically manufactured and imported products," it points out. However, it also notes that “their rapid and widespread implementation has created unintended economic consequences, particularly for trade and industrial competitiveness”.

 

The dangers to domestic manufacturing, however, go beyond just QCOs. In the areas where they have been implemented, tariff barriers have also risen, “suggesting a broader protectionist trend”. Just as Prof Saha worried shortly after India's independence from colonial rule, QCOs now are biased towards metals, machinery, and electronics, textiles, chemicals, and plastics and rubber - all sectors which “also show high levels of firm concentration, raising concerns about competitive distortions”.

 

Raising standards to global levels

 

By March 2025, 93.3 per cent of Indian standards had been harmonised with existing global standards. Speaking at the release of the research paper, Sanjeet Singh, senior adviser at the Niti Aayog, said the sudden increase in the number of QCOs had more to do with capacity building on these issues within the government. “The challenge was always there to use them as a core regulatory instrument to deploy them as mandatory quality floor. We are responding to them now," he said.

 

For instance, the ongoing festival season of lights is a good example of why quality control and safety should be paramount, given that use of household and commercial electrical goods jumps at this time. The QCOs issued by 2024 by the Department for Promotion of Industry and Internal Trade has brought many such electrical items in line with best practices. For example, the order notes that all electrical appliances intended for household, commercial or similar applications with rated voltage not exceeding 250V single-phase alternating current or 415V three-phase alternating current and which do not fall under the scope of any other QCO will now be covered under the compulsory certification of BIS.

 

How QCOs are choking industry

 

The QCOs operate in two ways. First, when the imports of intermediates are targeted, the lack of domestic alternatives for critical inputs like cold-rolled grain-oriented steel cause production bottlenecks that are unhelpful for the economy. Second, some of these orders, while ostensibly pushing for consonance with global standards, solidify the differences.

 

These create a bias in favour of larger firms, which are better able to absorb compliance costs, “sometimes benefiting from the exclusion of smaller competitors”, whereas micro, small, and medium enterprises (MSMEs) face disproportionate compliance burdens, including certification costs of up to Rs 15,000 per consignment and long delays in approvals for foreign suppliers.

 

Can the problem be fixed?

 

Prabhakar's paper suggests a simple correction that could resolve MSMEs' problems. While the government has liberalised the QCO regime allowing ministries other than Commerce and Industry to issue them, Prebhakar argues that if QCO notifications were to specify the corresponding HS codes ('Harmonised Standards' that are used globally to identify tradable goods), it would reduce compliance delays and operational confusion.

 

“Since these orders are issued by various line ministries, each ministry must indicate the impacted HS codes," her paper notes. Singh, too, agreed that the paper is a feedback “offering the scope for a nuanced recalibration”, saying that India needs to offer the world zero defect products and that the QCOs are a step in the right direction.

 

The other suggestion from the paper could be more difficult to achieve. It says the Competition Commission of India (CCI) should monitor sectors where QCOs have been introduced, “specifically those with high firm concentration” and discover their effects through a study of market share and price trend analysis.

 

The CCI, however, is not structured to do real-time analysis of policies in motion. It takes up industry complaints and uses them as the base to mount an investigation. In fact it does not investigate government policies at all in its work, even as it examines market distortion by both state- and privately-run companies. In the global push for protectionist policies, prising out specific QCOs that distort both processes and practices could be a difficult exercise.

 

India on a quality control mission

 

• India has 22,300 standards
• 94 per cent harmonised with ISO/IEC standards
• New standards increased from 407 in 2014 to 1,038 in 2025
• 151 QCOs notified covering carbon steel, alloy steel and stainless steel
• Products under mandatory certification grown from 106 products under 14 QCOs in 2014 to 773 products under 191 QCOs in 2025
• BIS certification process is industry size agnostic with:
• a) relaxation/concession to the domestic manufacturers in the MSME sector
• b) for imports intended for export production by SEZ