The Indian government has taken a significant step toward enhancing the country's manufacturing competitiveness by rolling back numerous quality control orders (QCOs) on imported factory inputs. This strategic move, announced in late November 2025, aims to reduce production costs for Indian manufacturers and strengthen their position in global markets.
Understanding the QCO Rollback Impact
The decision to eliminate these import barriers comes at a crucial time when world trade faces uncertainty due to US President Donald Trump's recent tariff hikes. By removing QCOs that functioned as non-tariff barriers, Indian exporters can now access cheaper raw materials and intermediate goods, enabling them to produce more cost-effective products for international markets.
This policy shift doesn't imply that quality standards are being compromised. Rather, it addresses the imbalance where quality checks were being used as protective measures that artificially increased import costs. The protection offered to domestic producers through these mechanisms wasn't reflected in official tariff structures, creating market distortions.
The Need for Broader Trade Policy Reform
While the QCO rollback on raw materials and intermediate goods represents progress, experts argue that India's import policy requires more comprehensive overhaul. The current approach maintains quality checks on finished goods imports even when locally manufactured equivalents face no such requirements, creating an uneven playing field.
For decades, India's import duty structure has followed a pattern where raw materials attract the lowest tariffs, intermediate goods face moderate duties, and finished products bear the highest charges. This approach lacks economic logic since value addition at different production stages contributes equally to income generation for labor and capital.
Addressing Structural Distortions in Trade Policy
The practice of imposing higher tariffs on later-stage production items creates economic distortions by inflating effective protection for downstream activities while making upstream investments less attractive. This results in resource misallocation throughout value chains.
In some cases, India's tariff patterns across production chains have become inverted, further complicating the manufacturing landscape. An ideal tariff structure would provide uniform effective protection across the economy and maintain low, preferably single-digit, tariffs on all imports to ensure global competitiveness.
The fundamental principle guiding trade policy should be parity between imports and domestic production. When local output undergoes compulsory quality scrutiny, imported equivalents should face similar requirements. For other products, consumer protection laws, fair trade regulations, and competitive market forces can naturally ensure quality standards without item-by-item testing.
Market competition typically filters out substandard products as quality-conscious consumers naturally gravitate toward better offerings. Instead of addressing import costs on individual items, comprehensive duty structure reform would create a more efficient, distortion-free economic environment that enhances overall productivity and positions India as a truly competitive global manufacturing hub.
