Overview
The government has introduced the Transition Facilitation (Quality Control) Order, 2026. The move comes after criticism of the expanding QCO regime, which had grown from 88 products in 2019 to 765 by the end of 2024.
Key Developments
- June 25, 2026: DPIIT notified the new order, allowing temporary use of BIS Scheme‑I certified inputs.
- Eligible sectors include toys, footwear, and air‑conditioners. Firms must meet eligibility criteria and obtain approval from a DPIIT‑constituted committee.
- More than 600 QCO‑covered products, many of them intermediate inputs (chemicals, steel, textiles, machinery, electronics, rubber, plastics), remain pending reassessment.
- A recent CSEP study on chemicals shows divergent impacts on large vs. small firms.
Important Facts from the CSEP Study
The study tracked chemicals, a critical intermediate input. The first chemical QCO appeared in 2018 and coverage rose to 52 products by 2024, pushing the share of chemical‑using firms under regulation from 11.8% (2019) to 56.6% (2024).
- Large firms: QCOs led to a 9.6% rise in production but a 37% fall in gross value added (GVA), indicating higher output at lower value creation.
- Small firms: No significant change in production or GVA, but profitability dropped by 47.6%.
- Both size groups face supply‑chain risks; smaller firms bear a heavier compliance burden.
Exam Relevance
Understanding the QCO framework is essential for GS 3 (Economy & Trade) as it illustrates how non‑tariff barriers affect India’s integration into global value chains. The role of the DPIIT highlights inter‑ministerial coordination in industrial regulation. The impact on MSMEs ties directly to questions on inclusive growth and competitiveness.
Internationally, the issue was raised in the WTO’s eighth Trade Policy Review of India, where the EU, US, Brazil, China and Indonesia flagged QCO‑related barriers.
Way Forward
- Prioritise reassessment of QCOs on intermediate goods to avoid supply‑chain disruptions.
- Design targeted assistance for MSMEs: financial support, technical help, and time‑bound exemptions.
- Embed supply‑chain impact analysis in future QCO design, balancing quality assurance with cost‑competitiveness.
- Link QCO reforms to the Viksit Bharat 2047 agenda, ensuring standards boost rather than hinder growth.
By easing certification bottlenecks and rationalising QCO coverage, India can enhance its manufacturing scale, improve global competitiveness, and protect the profitability of small enterprises.