Infrastructure: How India can create value by rethinking its strategy on standards

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Published: February 27, 2017 3:50:50 AM

For most of us, the word ‘infrastructure’ evokes the mental image of roads, railways, ports, airports, power stations, etc.

Infrastructure, roads, railways, ports, airports, power stations, quality infrastructure, GDP, retail market, Make-In-India, Bureau of Indian Standards and Quality Control of IndiaFor most of us, the word ‘infrastructure’ evokes the mental image of roads, railways, ports, airports, power stations, etc. (Source: Reuters)

For most of us, the word ‘infrastructure’ evokes the mental image of roads, railways, ports, airports, power stations, etc. However, there is another key piece of infrastructure that is invisible to the naked eye; and yet existent everywhere around us. And that is the infrastructure of quality standards.

To the uninitiated, the term ‘quality infrastructure’, is the institutional framework that establishes standards and ensures that they are properly implemented and conformed to. Despite the seemingly alien jargon, all of us inadvertently deal with standards in every walk of life. The ubiquitous news report that an IIM graduate leaves a lucrative job to do social work—is a classic example. The fact that the graduate in question is from IIM; immediately signals to you that she has a basic cut off brilliance, or ‘quality’ which should factor in any analysis about her. So even if she were to commit fraud tomorrow, the news report would still read—‘IIM graduate commits fraud’; and your first instinct will be to think that it must have been a very sophisticated crime!

Look at the bottom of your speaker, cell phone battery, bottle of water, packet of food, or a company hoarding; and there should be a constellation of acronyms scribbled somewhere—which is meant to convince you that the product conforms to the IIM equivalent of that industry in India.

Manufacturing in India for the past few decades has been in the range of 12-15% of GDP. The Make-In-India vision is to increase it to 25%. Most of the rhetoric around this usually focuses on reforms on availability of land, labour, infrastructure, and ease of doing business. After all if you were to start manufacturing, you should be able to lease land cheaply for setting up the factory; hire labour easily to work there; have good infrastructure to transport your goods, and finally ensure that the paperwork gets processed as seamlessly as possible.

But all of this will amount to nought if the retailer, be it domestic or foreign, who buys from the manufacturer remains unimpressed with the product’s quality. So manufacturers and retailers, and through them, consumers have a trust deficit that is preventing the manufacturer from shipping the product from the factory to the shop shelf.
Any country needs at least three key ‘agents’ to bridge this trust deficit. First, there need to be organisations that create, and implement reliable, widely acceptable quality standard for the product. Second, the economy would need laboratories and agencies equipped to test if a particular batch of goods indeed matches this quality standard. And third, another organisation needs to accredit these laboratories, so that the certificates are indeed of significance.
If the final consumer does not trust any one of these key stakeholders—the Make-In-India mascot lion will stop in its tracks. If the organisation setting the standard isn’t well-known or trusted; then it doesn’t matter how meticulous the laboratories are, those certificates will mean nothing.

Similarly if there aren’t enough laboratories, then having good standards is meaningless. And finally, if consumers feel that the accreditation body isn’t doing a great job in certifying the laboratories, and they are in fact vulnerable to easy manipulation, then again the system fails.

While many bemoan India having to import most of its electronic goods—a lesser known fact is that for many technology products, standards’ agencies are known in the past to take months, if not years to arrive at new certification. Of course by then, technology becomes obsolete; and in the process companies miss out on the global bus.

In other cases, businesses struggle to get ready information and assistance on how to get their product quality stamped. Finally, when domestic standards are not aligned well with global one, then trade suffers. Indian companies looking to export often find their shipments held up at ports in the EU or the US since the Indian standards that they met, unfortunately fell short of globally accepted standards. Similarly obnoxiously set Indian standards are known to keep latest laptops and tablets released globally to be released in India only after several months.

As is evident, standards are important to companies; they are also important to the government for regulation. To have trusted organisations that set standards, test standards and accredit the testing—is also an expensive affair. The World Bank estimates that setting up national accreditation and standards bodies take up to $2 million each, and testing laboratories’ infrastructure cost can go up to $500 million. It takes anywhere between five to 15 years to align with global best practices.

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World over, the standards business has slowly become an industry of its own, with governments asking companies to bear the cost of setting standards and accrediting their products; in exchange of lesser regulatory burden. In the UK, all bits of the chain are privatised—the accreditation body, the standard setting body, and testing laboratories.
In developing countries like India – where market has yet to mature; the government is needed to step in at all parts of the value chain. The process naturally also implies that the quality infrastructure remains fraught with inefficiencies.

In India, there are broadly two major standards agencies, the Bureau of Indian Standards and Quality Control of India —both are under the government, and struggling to cope with workloads. Within them are a number of accreditation and testing bodies; which unfortunately don’t talk much to each other. Another anomaly is conflict of interest. Anywhere in the world, it’s very important that the accreditation agency also isn’t in charge of setting the standard, and then enforcing it. In India, the relationship between them is a bit murky.

Standards and quality control are admittedly very technical subjects. However, if India needs to position itself as one of the economic leaders in the new global order; it has to start rethinking its strategy on standards.

The author is deputy head of economics to a foreign mission based in New Delhi. Views are personal

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