Opinion: Quality Control and India’s Manufacturing Growth

Context

• • India needs manufacturing firms that can scale, integrate into Global Value Chains (GVCs) and compete internationally.
  • Quality Control Orders (QCOs) are intended to ensure product quality and prevent sub-standard goods. DPIIT issues QCOs under the BIS framework; their objectives include consumer safety, quality improvement and preventing unfair trade practices.
  • However, excessive or poorly designed QCOs can increase compliance costs, restrict input availability and disrupt supply chains, particularly for MSMEs.

1. The QCO Challenge

• • Products covered by QCOs increased sharply from 88 in 2019 to 765 by December 2024.
  • Several QCOs covering intermediate goods were subsequently revoked or suspended because of concerns regarding:
    • Input availability
    • Higher production costs
    • Supply-chain disruptions
    • Compliance burden
  • This is important because manufacturing depends heavily on quality-certified intermediate inputs such as chemicals, steel, textiles, machinery and electronic components.

2. Government’s Transition Facilitation Mechanism

• • The Transition Facilitation (Quality Control) Order, 2026 seeks to ease temporary difficulties in obtaining BIS certification.
  • Eligible firms can temporarily source specified products from BIS Scheme-II licensed suppliers in designated sectors, subject to eligibility conditions and DPIIT committee approval.
  • Such transition mechanisms seek to balance quality regulation with continuity of production.

3. Findings on Chemicals

A CSEP study cited in the article examined firms using chemicals as intermediate inputs.

• • Firms exposed to chemical QCOs increased from 11.8% in 2019 to 56.6% in 2024.
  • Among larger firms, QCO exposure was associated with:
    • 9.6% increase in production
    • 37% decline in Gross Value Added (GVA)
  • For smaller firms, QCO exposure was associated with a 47.6% decline in profitability.

Key Insight:

Higher production ≠ higher value addition. Quality regulation can improve standards while simultaneously increasing input costs and reducing competitiveness if poorly calibrated.

4. Why MSMEs Need Special Attention

• • Smaller firms have limited capacity to absorb:
    • Certification costs
    • Compliance expenses
    • Delays in obtaining inputs
    • Higher input prices.
  • Therefore, a uniform regulatory burden can have asymmetric effects across firm sizes.

Way Forward

• • Conduct periodic impact assessments before expanding QCO coverage.
  • Prioritise regulation of products where quality risks are significant.
  • Provide MSMEs with certification assistance and transition periods.
  • Ensure adequate domestic availability of certified intermediate goods.
  • Evaluate QCOs on quality, cost, productivity, GVA and GVC competitiveness, not merely the number of products covered.
  • Integrate supply-chain considerations into both new QCOs and reassessment of existing ones.

Conclusion

Quality standards are essential for “Zero Defect–Zero Effect” manufacturing, but regulation must remain proportionate and predictable. The objective should be to raise quality without reducing the scale, efficiency and competitiveness of Indian manufacturing.