The decision of the govt to fix mandatory standards on some imported goods can become a game-changer for the vision to make India more globally competitive
By Sushmita Dasgupta
A recent decision of the government of India allowed the Bureau of Indian Standards (BIS) to set quality norms/technical standards for 371 key items, in the first phase, by March 2021. BIS has been accorded the status of the national standards-setting body since October 2017. Even though the BIS certification scheme is voluntary, from time to time, the central government has made standards mandatory in view of public interest. The department of commerce has identified these 371 items. They include several segments ranging from steel, chemicals, pharmaceutical, electrical machinery to furniture, toys etc. Out of these 371 key items, the technical regulations for 150 products have already been firmed up.
The move by the central government has the potential to open up a significant opportunity for enforcement of mandatory standards within the country in a time-bound manner. This shall compel our domestic manufacturing, irrespective of whether they cater for the domestic demand or the global market, to adhere to BIS-set standards. Further, this can act as a stepping stone to make Indian industry more competitive globally, depending upon th adaptive efficiency of BIS to align itself with global standards. As per the WTO, domestic manufacturing and overseas suppliers must conform to the same standards.
The likely ramifications of the government’s recent decision on our merchandise trade are:
1. Reduction in merchandise imports: All sub-standard imports will stop flooding our domestic market, and thereby, the import bill will also fall, though gradually. The gradual fall in imports would be broadly influenced by the scale of enforcement of the quality standards at various ports and the availability of the trained professionals required.
2. Rise in exports of merchandise goods: This is likely to happen with a time-lag of at least 5-15 years, depending upon the gestation period of a product being manufactured in India. The change on the ground is also gradual. Since the technical regulation for 150 products has already been decided by BIS, the only task left for the government would be to enforcement and implementation. Further, for the balance, 221 key items, technical regulations have to be set by March 2021 in the first phase. Thus, all the products manufactured in India by large industries, MSMEs and SMEs have to now adhere to uniform standards. As we become more closely aligned with global standards, we will become more competitive.
India can become a part of regional trade agreements, as it will have a competitive advantage in at least some of the product lines. Hence, it will also be able to reap the benefits of trade through regional trade agreements. Importing raw materials and intermediate items at zero or very low tariffs would lower the cost of production of industries using these as inputs.
This will also eliminate tariff and non-tariff barriers impeding the free movement of goods. It is pertinent to mention here that the basic reason why the FTAs/PTAs signed by India so far have not helped the domestic economy much is that India’s quality/standards, compared to what the trading partners expect, are inadequate. So, ultimately the moot point is India has to improve its quality/standard to gain from trade.
The interdependence of countries seems to be the order of the day under the present global dynamics, especially when the country is dealing with uncertainty. This is particularly visible in the RCEP, where despite having serious political and territorial issues with China, many countries, have set aside their differences. To play a worthy role in the global game of interdependence, India has a compelling need to improve quality/standards and align them with the global level.
The decision of the government to fix mandatory standards on a limited number of imported goods, to begin with, and doing this in a time-bound manner can prove to be a game-changer in the long-run, especially if India is to become globally more competitive. Also, this is likely to enhance India’s ability to join regional trade agreements without the fear of endangering domestic industry being wiped out by foreign competition.
Senior economic adviser, department of commerce, GoI. Views are personal