The absence of a quality mindset

Policymakers and the corporate sector need to understand that without adopting global quality standards, India cannot become a global manufacturing hub

It took several years of bad publicity — ranging from non-standard quality (NSQ) drugs and counterfeit medicines being sold freely in the domestic market to pharmaceuticals exported by Indian firms resulting in hundreds of deaths across multiple countries — before the Indian drug regulator decided to act. At the fag end of 2023, the government and the regulator — the Drug Controller General of India (DCGI) — mandated that all drug manufacturers, irrespective of their size, would have to comply with the World Health Organization’s (WHO’s) Good Manufacturing Practices (GMP) norms. The manufacturers will need to obtain WHO GMP certification by this year.

Before this change, only Indian drugs meant for the US or European countries needed to ensure that they met the quality standards of developed countries. The US Food and Drug Administration (FDA) inspected manufacturing facilities of Indian drug manufacturers wanting to export to that country. Without its certification, drug manufacturers in India could not sell in the US.

Meanwhile, bad publicity is dogging another Indian manufacturing sector. Singapore and Hong Kong recently banned certain spice blends from two prominent Indian brands — MDH and Everest — saying that they contained unacceptable levels of ethylene oxide (ETO), a carcinogen.

The regulator of this sector — the Food Safety and Standards Authority of India (FSSAI) — acted swiftly but its actions gave rise to several puzzling questions. The FSSAI ordered testing of all spices manufactured in India to ensure they adhered to its standards and also instructed the Spice Board to ensure that ETO levels were tested for all spices meant for exports. This was the good part. However, it was soon reported in multiple newspapers, including this one, that the FSSAI had relaxed the permissible norms for pesticides in herbs and spices tenfold before Singapore and Hong Kong raised concerns about ETO levels in MDH and Everest. The FSSAI defended its action, saying it increased the pesticide limit only after consulting experts. Also, reports suggest that the regulator is not necessarily concerned about the ETO limits of spices being sold in India — only those meant for exports.

In a third industry — automobiles — India finally got around to prescribing the Bharat New Car Assessment Programme (Bharat NCAP), based on the Global NCAP. The new cars would be tested to assess their quality and safety in the event of a crash. Until this happened, Indian auto customers would only have a vague idea about how safe their cars were structurally.

There have been many reasons proffered for India’s inability to become a global manufacturing hub despite the efforts and plans of successive governments for the past three decades. While problems like higher logistic and power costs, lower labour productivity, and issues with local regulations have often been talked about, the abysmal quality standards of many Indian products generally escape attention.

Successive Union governments, state governments, as well as sector regulators, have often paid little heed to the quality of goods being manufactured and sold in India, or even those being exported to lesser-developed countries in Latin America, Africa, or Asia.

It is not that Indian manufacturers cannot manufacture high-quality products. Any manufacturing unit in any sector exporting to the US, Europe, Japan, South Korea, etc, will meet the higher quality standards of these markets. The goods they export are vastly superior in quality compared to the goods the same manufacturer sells in the domestic market.

Nor is it that the Indian regulations are routinely lax, though that is also the case in many sectors. Indian regulators typically model their regulations based on global practices and norms. While some Indian norms — in drugs or foods — are not as stringent as those of developed countries, others compare favourably.

The issue is often that of institutional capacity. Prescribing that all drug companies need to meet WHO GMP is of little help if you cannot ensure whether the firms are actually following the standards regularly and not just at the time of certification.

Similarly, there is no point in subjecting only spices meant for exports to stringent testing for ETO and other contaminants like pesticides, while letting domestic customers consume products that are substandard or contaminated.

The argument that micro, small, and medium enterprises lack the capital and resources is a poor excuse for inaction and lack of thinking by policymakers and regulators. Setting up enough laboratory testing facilities, hiring enough qualified inspectors, and helping smaller enterprises to become better in quality is the job of the government and regulators.

Nor is the argument that meeting quality standards will increase costs tenable. Cost competitiveness can be achieved by improving logistics, reducing power costs and government taxes — without compromising on quality standards. Most cars have a higher sticker price in India than in developed markets because of the taxes levied by the government. And yet, the domestic consumer gets shortchanged in terms of quality compared to those in the overseas market, even though the same manufacturing facility may be making both.

Every country that became a manufacturing power did so by raising the quality bar of products made by them, and by ensuring that domestic customers were not shortchanged in terms of quality.

Indian policymakers need to understand this. Equally, the corporate sector needs to understand that without adopting the quality mindset, they can never aspire to be globally competitive.

The writer is former editor of Business Today and Businessworld, and founder of Prosaic View, an editorial consultancy