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Study Reveals Product Quality Regulations Boost Domestic Manufacturing

June 3, 2024

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New standards have led to increased production in electronics, toys, and textiles.

The implementation of Quality Control Orders (QCOs) and Compulsory Registration Orders (CROs) has positively influenced the Indian economy by promoting local manufacturing and enhancing research and development expenditures, as per a trade policy think tank’s analysis. The 2012 CRO application on electronics and IT goods, including mobile phones, batteries, and laptops, resulted in a 15% rise in domestic output the subsequent year. Post-implementation, industries like electronics, textiles, and toys, which are subject to QCOs and CROs, have seen annual growth rates between 8-10%, a significant increase from the 4-5% growth prior to these regulations, as reported by the Global Trade Research Initiative. Affected sectors have reportedly upped their research and development spending by an average of 20%, aiming to not only meet but surpass the set standards, thus driving innovation and enhancing quality, according to GTRI founder Ajay Srivastava’s report.

However, Srivastava noted that these findings are based on anecdotal evidence and further comprehensive studies are necessary to fully understand the advantages and challenges associated with QCOs and CROs. The introduction of QCOs, coupled with increased import duties, has markedly curtailed the import of inferior-quality toys, with India’s global toy imports plummeting from US$ 304.1 million in FY 2019 to US$ 64.9 million in FY 2024, and imports from China falling from US$ 264.6 million to US$ 41.5 million during the same timeframe.

QCOs are obligatory standards established by the Bureau of Indian Standards (BIS) that detail specific quality benchmarks. Products failing to meet these standards are subject to seizure, and producers and importers face punitive actions. CROs are essentially QCOs with an added requirement for registration with governmental bodies, introducing an additional verification layer for products.

India has accelerated the issuance of QCOs and CROs since the new BIS Act was introduced in October 2017, which streamlined the notification process for products, systems, and services that must adhere to certain standards. Since the Act’s inception, over 140 QCOs have been issued for upwards of 550 products, a stark contrast to the mere 14 QCOs for 106 products before 2014.

While India has expedited the issuance of QCOs and CROs, there is a need to enhance every aspect of the quality system. Small and medium enterprises require support to comply with QCO standards, including phased implementation, financial aid, and technical advice.

To further advance India’s quality systems, it is recommended to align domestic standards with international ones to boost export competitiveness and pursue international accreditation for BIS certifications, thereby saving manufacturers from incurring additional costs for certifications in foreign markets, as suggested by GTRI. BIS should aim for accreditation to gain international recognition for its certifications. Presently, many BIS Act regulations are based on ISO/IEC standards, yet BIS certifications are not widely accepted internationally due to the absence of accreditation. International acceptance would prevent manufacturers from having to obtain additional certifications from other entities.

ISO and IEC are global standards that ensure the safety, reliability, and quality of products and services. The report advocates for the signing of Mutual Recognition Agreements (MRAs) with key trading partners, which would facilitate smoother international trade by making domestic regulations acceptable to countries with differing laws.

Quality standards should focus solely on critical parameters, and technical regulations should concentrate on health, safety, and environmental aspects, rather than covering entire product standards. However, many QCOs currently regulate the full product standard, not just the vital health, safety, and environmental parameters, leading to higher compliance costs.

GTRI emphasizes that quality standards should not act as non-tariff barriers. Some countries utilize mandatory certification to control imports, with China frequently employing this method to delay import permissions from certain nations.

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