Quality Control & Judicious Policy

Quality-control orders should be used when they are required but not for price or strategic objectives because those harm India more than they benefit

- LAVEESH BHANDARI

India is on a path of increasing openness in its markets, and this heralds the start of a far more confident, less reactive, and more proactive import policy regime. This change in gear appears to have occurred sometime last year but has since been gathering momentum through the previous Budget and now with the various possible free-trade agreements (FTAs).

As is evident, there is a bully in town that Indian industry needs to be protected against. But as every parent knows, there is such a thing as too much protection. The child also needs to be left alone in the playground. Take that self-respect away from the child, and you will have to bear the burden of perpetual dependence and unending support. Let us work with that same analogy. Yes, there is a Chinese bully in the manufacturing town, but there are also mechanisms of addressing that challenge. We need to use the tools that protect Indian industry judiciously; too much of them, and we get relative stagnancy in manufacturing's share of the total value at between 16 and 17 per cent.

Of the various forms of protection, the more insidious ones go by the name "quality control orders" or QCOs. QCOs are requirements that a particular product achieve a certain quality for it to be bought and sold in the country. There are currently several hundreds of QCOs operating in the country and countless ones globally. When a QCO is imposed on a product, all sellers—domestic or international, large or small, old or new—need to meet that quality standard. Typically, the new, small, and international units bear the adverse effects much more, but all of this eventually flows back to impacting the Indian consumer. To appreciate the issue, let us differentiate between the imposition and implementation of QCOs.