Quality control and India’s manufacturing growth
Why in news?
DPIIT’s Transition Facilitation (Quality Control) Order 2026 eases BIS certification.Experts urge wider QCO reassessment.
UPSC Relevance
Mains: GS-III – Changes in industrial policy and their effect on industrial growth; Effects of liberalisation; Growth, development and employment; Inclusive growth (MSMEs).
What is a QCO?
- A Quality Control Order makes an Indian Standard mandatory for a product. Once notified, the product cannot be made, imported, sold or stored without the BIS standard mark.
- QCOs are issued by the line ministry (e.g., Chemicals, Steel, Textiles, DPIIT) in consultation with BIS, under Section 16 of the BIS Act, 2016. Violations attract penalties under the Act.
- BIS conformity schemes
- Scheme-I (Product Certification / ISI mark): Licence after factory inspection and sample testing by BIS – slower and costlier.
- Scheme-II (Compulsory Registration Scheme): Registration based on self-declaration and test reports from BIS-recognised labs; mainly electronics and IT goods – lighter process. The 2026 Transition Order lets firms temporarily source from Scheme-II-licensed suppliers.
- They apply equally to domestic and foreign producers; foreign firms need BIS licences under the Foreign Manufacturers Certification Scheme (FMCS).
- It is often considered a non-tariff barrier.
- A non-tariff barrier is a trade restriction used by countries to limit imports through mechanisms other than direct taxes or duties.
Recent issues and developments
- WTO scrutiny: At India’s 8th Trade Policy Review (July 2026), QCOs and other Non Tariff Barriers were questioned by the EU and US, and also by BRICS partners Brazil, China and Indonesia.
- Rapid expansion: Products under QCOs rose from 88 (2019) to 765 (Dec 2024). Expansion slowed by end-2025 as several QCOs, mainly on intermediate goods, were revoked or suspended.
- New order: Transition Facilitation (Quality Control) Order, 2026, notified by DPIIT on 25 June 2026. Firms unable to get BIS Scheme-I certification can temporarily source from BIS Scheme-II-licensed suppliers in sectors like toys, footwear and air conditioners, subject to eligibility and approval by a DPIIT committee.
- Pending work: 600+ QCO-covered products still to be reassessed, including key inputs in chemicals, steel, textiles, machinery, electronics, rubber and plastics.
- Success of quality standards should be judged not by the number of products covered, but by whether quality improves without hurting scale, efficiency and competitiveness.
Why did QCOs expand ?
- Consumer safety: Curb substandard goods (e.g., toys, helmets, pressure cookers) as per spirit of Art. 47 and Consumer Protection Act, 2019.
- Atmanirbhar Bharat: Check cheap, low-quality imports, especially from China; support PLI-linked domestic manufacturing.
- Push domestic firms to upgrade quality – “zero defect, zero effect”.
- Allowed under WTO Technical Barriers to Trade (TBT) Agreement for legitimate objectives (safety, health, environment).
Problems with excessive QCOs
- Input shortage: Many covered inputs (polymers, fibres, chemicals) are not produced domestically in enough quantity and foreign suppliers face BIS licensing delays causing shortage.
- Cost push: Higher input prices due to compliance cost cut value addition downstream ( GVA for large firms reduced by 37%).
- MSME squeeze: Fixed compliance costs hurt small firms most (reduced their profitability by 47.6%).
- Export competitiveness: Costlier inputs make Indian final goods less competitive, working against GVC integration.
- Trade friction: Seen by partners as disguised Non Tariff Barriers; raised as Specific Trade Concerns at the WTO TBT Committee.
- BIS testing and inspection capacity lags behind the pace of notifications.
Government’s course correction
- Rajiv Gauba Committee ( NITI Aayog) recommended rationalising or phasing QCOs on raw materials used by MSMEs.
- Revocations were made on certain products : Six QCOs on fatty acids (22 Oct 2025); 14 QCOs on plastics, polymers, polyester fibre and yarns (12 Nov 2025); seven chemical QCOs (28 Nov 2025).
- Transition Facilitation (Quality Control) Order, 2026 – temporary flexibility for firms stuck on Scheme-I certification under BIS Scheme-II.
Way ahead
- Regulatory Impact Assessment (RIA) before every new QCO – check domestic capacity, input prices and downstream effects.
- Priority: Final consumer goods with safety risks must be prioritised and not intermediate inputs.
- Economic Survey 2024-25 on MSME : Urged deregulation and easing of compliance for MSMEs via Graded compliance, fee waivers, longer transition, common testing facilities.
- Capacity: More BIS-recognised labs; time-bound licensing for foreign suppliers.
- Global alignment: Mutual Recognition Agreements (MRAs) and adoption of international standards (ISO/IEC).
- Sunset and review clauses in every QCO with periodic reassessment.
Practice MCQs
Q1. Consider the following statements about Quality Control Orders (QCOs):
1. They are issued under Section 16 of the Bureau of Indian Standards Act, 2016.
2. They apply only to imported goods and not to domestic manufacturers.
3. They can be issued by line ministries in consultation with BIS.
How many of the above statements are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer: (b) QCOs apply equally to domestic and imported goods.
Q2. With reference to the WTO Trade Policy Review Mechanism, consider:
1. All members are reviewed at the same interval.
2. Reviews are conducted by the Trade Policy Review Body, which is the General Council.
3. The reviews are meant to enforce specific WTO obligations and impose penalties.
Which of the above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
Answer: (c) Frequency depends on trade share; TPRs are for transparency, not enforcement.
Mains practice questions
Q1. Non-tariff measures are increasingly shaping India’s trade relations. Discuss the challenges they pose to India’s integration into global value chains and suggest reforms. (10 marks, 150 words)