Behind India's QCO Rollback: A Tale of Trade and Trade-offs

In November, New Delhi conceded something it had resisted for years. The government rolled back 80 quality control orders (QCOs), including 14 orders on chemicals, polymers and fibres used in textiles, 55 on various steel intermediates and eight on non-ferrous metals. The roll-back has been a long-standing demand of domestic industries.

However, the move raises an obvious question: At a time when nations are trying to improve the quality of products on store shelves, why is India going the other way and diluting quality standards for consumer products?

The answer lies in the dual nature of these QCOs—while some of them were indeed intended to ensure quality of manufactured goods in the country, the others had a purpose that went beyond consumer welfare and strayed into India’s international trade policy. At least some of these QCOs can be linked to India’s need for ‘non-tariff barriers’ to prevent the import of cheap manufactured goods into the country swamping and eliminating, local manufacturing industry. 

What are QCOs?

QCOs are essentially government mandates requiring certain products to meet Indian standards and carry a Bureau of Indian Standards (BIS) certification before they can be made, imported, or sold. Conceived to realise the vision of "zero-defect" products, QCOs were meant to raise the game for Indian manufacturing by weeding out sub-standard goods.

QCOs began modestly, covering only 70 products in 2016. But in nine years, it exploded to over 770 products and most of them were imposed after 2019-20. 

Why Were They Opposed?

While the intentions may have been noble and led to a "culture of quality", the implementation threw up real challenges for local manufacturers, particularly those from the small and medium segment. Multiple manufacturing heartlands in the country have complained about getting caught in a web of new QCOs.

Eventually, they have also led to supply chain disruptions. Certification delays—especially for suppliers of critical components—have extended lead times for manufacturers and exporters, while lengthy testing processes have further pressured production timelines.

"Micro, Small, and Medium Enterprises engaged in chemicals, electronics, and packaging materials have experienced considerable adjustment pressures due to QCO implementation," says Prateek Bedi, assistant professor of Finance and Accounting at IMI Delhi.

Industries from metals and machinery to electronics, textiles, chemicals, plastics, rubber and even footwear have seen their critical inputs brought under mandatory standards. 

According to a study by the Centre for Social and Economic Progress (CSEP), a majority (45.7%) of QCOs affect intermediate goods, such as viscose fibre used in synthetic textiles or steel fasteners for automobiles. "Such measures risk exacerbating existing challenges to India's manufacturing competitiveness, an area where the country already lags behind its peers," it added.

Even a report by NITI Aayog called the practice of mandating domestic certification for basic raw materials unusual.

The ‘Other’ Reason Behind QCOs

However, not all the QCOs were about ensuring the quality of products made in India. 

One clue lies in the products these orders targeted. Rather than focusing on finished consumer goods, about 70% of QCOs issued in the past five years have been imposed on raw materials, intermediates or capital goods, according to a NITI Aayog internal report, as reported by The Print. 

While the QCOs made life harder for Indian suppliers, for foreigners, the impact was even more drastic.

This is because, to be certified and licensed by the BIS, often a team from the agency has to travel to the factory where the goods are made to physically inspect it. "This exercise is time-consuming and expensive, and often manufacturers do not want to get into such bureaucratic hassles. India should look at how other jurisdictions have accepted third-party licensing and certification at a product level," says Shashi Mathews, partner at CMS INDUSLAW, points out.

Not surprisingly, the explosion of QCOs over the last decade coincided with a broader policy shift towards economic self-reliance, encapsulated in campaigns like 'Make in India' launched in 2014.

Learning From The West

The inspiration for using QCOs as a tool to address trade imbalances and curb imports may have come from the experience of Indian exporters as they tried to tap into the markets of developed economies such as the US and the EU.

With a view to promoting exports and increasing the share of the manufacturing sector in India’s economy to 25%, the country has pursued several free trade agreements (FTAs) with advanced economies, resulting in tariffs getting diluted.

Still, Indian firms continued to struggle to meet the technical and sanitary-phytosanitary (SPS) requirements in advanced markets, while foreign goods entered India with far fewer regulatory checks.

As a result, India's share of global exports started stagnating at around 2% for nearly 11 years now, having grown from 1.2% in 2005. The country has a target of taking this to 10% by 2047. Similarly, the share of manufacturing in GDP hovered around 17% only, against the target of 25% by 2025.

In 2021-22, the country introduced the Production-Linked Incentive (PLI) scheme to supercharge the growth of the manufacturing sector and exports. However, the PLI scheme only served to further encourage sub-standard product flow from countries like China. 

Not surprisingly, India's imports from China kept rising year after year, with its trade deficit reaching an all-time high of $99.2bn in 2024–25, which experts flagged as alarming. Commerce Minister Piyush Goyal also repeatedly warned that inferior inputs were damaging India's export credibility.

New Delhi recognised that in the absence of strong domestic standards, India's hand was weakening in trade negotiations with foreign partners. With almost no technical barriers at home, partners had little reason to ease the regulatory hurdles Indian exporters faced abroad. 

Moreover, where local quality regulations did exist, they were often below international standards. This made it easier for developed countries to access our market because they already met higher benchmarks.

It was in this context that QCOs were seen as a way to kill several birds with one stone: manage the trade deficit, ensure quality imports, give India a credible non-tariff tool to curb imports, and make the local industry compatible with international standards to ease their entry into foreign markets.

Why the Rethink?

So, the question then arises: Why rethink the policy now? The answer lies less in domestic protests and more in international developments.

India's merchandise trade deficit surged to a record $41.68bn in October amid trade friction with the US, raising the need to export more to other advanced economies such as the EU. Chief Economic Advisor V. Anantha Nageswaran admitted last week that the negative spillovers of 50% US tariffs continue to linger even after exporters have shown commendable resilience.

With trade tensions simmering with Washington, New Delhi has been pushing for trade deals with other blocks, including the EU. In such negotiations, India's own protectionist playbook, particularly its swelling QCO regime, often comes under scrutiny by its trading partners. The proliferation of QCOs has featured prominently in bilateral talks.

"India's widespread adoption of QCOs has become an important topic in trade discussions, particularly with partners such as the US, which have at times viewed certain measures as potential non-tariff barriers affecting market access, predictability and compliance with World Trade Organisation [WTO] obligations," says Sanjay Notani, Partner, Economic Laws Practice.

In its 2025 National Trade Estimate Report, the US Trade Representative even expressed concerns that BIS standards are not fully aligned with international standards, "without demonstrating they would be ineffective or inappropriate, often do not provide a means of establishing conformity or include significantly burdensome requirements, and lack clear timelines for transition periods and license validity."

Anil Jauhari, former CEO of the National Accreditation Board for Certification Bodies, Quality Council of India, and a former member of the India–US Trade Policy Forum in his service days, recalls that there was always pressure from the US for India to accept their test reports. "We didn't agree unless it was reciprocal—meaning they should also recognise our test reports," he adds. But that never materialised. 

Another, related complaint was that India’s system is considered needlessly bureaucratic and complicated by foreign trade partners. 

In developed economies, standards bodies like the British Standards Institution in the UK and the American National Standards Institute in the US are private, hence they can't play a regulatory role but only provide standards. Their certification systems are simpler and cheaper, unlike India's most stringent and costly model.

"This drives up compliance costs for Indian manufacturers and makes our system look alien to foreign countries. They're not used to such heavy bureaucratic certification, so they naturally push for simplification," Jauhari says.

Jauhari says that QCO became an instrument to restrict imports rather than protect consumers. "Many countries do use technical regulations strategically, but their primary purpose still remains safety and health. In our case, it was led purely by trade concerns—targeting high-import sectors to curb the deficit," he adds.

Secondly, as an instrument for facilitating exports by certifying products in India, the QCO framework suffers from a key shortcoming: The global acceptance of BIS certificates remained limited because BIS has not consistently aligned its testing and certification systems with internationally recognised accreditation norms such as ISO/IEC 17025 and ISO/IEC 17065.

These ISO/IEC regulations ensure that testing and calibration laboratories operate with proven technical competence, producing reliable and internationally accepted results. They also certify that product-certification bodies evaluate and certify products in a consistent, impartial, and technically sound manner.

The accreditation gap not only distances India's conformity assessment system from global practice but also blocks the possibility of securing Mutual Recognition Agreements (MRAs) with major trading partners such as the US, the UK and the EU, forcing exporters to undergo repeat testing overseas.

BIS even lost acceptance by Singapore for electrical and electronics products under the India-Singapore FTA, a Research and Information System for Developing Countries discussion paper highlighted. This lack of credibility undermined the very purpose of QCOs as a quality checker. As a trade tool too, it did not bear results, since imports from China have reached $113.4bn in FY25 from $65.2bn in FY21.

With India-US appeared to have missed their earlier target to conclude the first tranche of their bilateral trade agreement by the fall of 2025, New Delhi understood that it could not wait any longer. India shifted its focus to other massive and developed markets but also kept its engagement alive with the US.

The Road Ahead

As India rethinks its quality control regime, a consensus is emerging on how to proceed across industry and policy circles. "The over-centralisation of power within BIS hampers effective QCO implementation, as sector-specific authorities better understand the ever-evolving technical and operational nuances of each trade," Mathews of CMS INDUSLAW notes.

Quality matters – no one disputes that Indian consumers deserve safe, reliable products and that Indian exports must meet global expectations. However, the key challenge is to strike a balance between enforcing domestic standards and ensuring smooth access to international markets in trade negotiations.

Jauhari says that the real purpose of technical regulations—health, safety, environment, and protection against deceptive trade practices—is to safeguard the public and therefore, business-to-consumer (B2C) products, which reach the common man, should get top priority. "Business-to-business (B2B) products can be treated more liberally, since they're used by informed manufacturers who understand compliance," he notes.

At the same time, abrupt regulatory swings—from aggressive expansion to sudden rollbacks—carry their own risks. Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative, notes that a phased, predictable approach—neither protectionist nor prematurely liberal—will be essential to ensuring that reform strengthens, rather than shrinks, India's industrial ambitions.