High Testing Costs Under QCOs Risk Squeezing MSMEs, Says GTRI

Why It Matters

Exorbitant compliance costs could push MSMEs out of the import market, consolidating power with large players and undermining the Make in India agenda. Reducing testing burdens is essential to preserve a diversified manufacturing ecosystem and sustain foreign‑sourced inputs.

Key Takeaways

• Testing fees up to Rs 20 lakh strain MSME importers
• Large firms absorb costs; small players face viability challenges
• High QCO compliance may curb Make in India supply chains
• GTRI urges caps, foreign lab recognition, risk‑based testing

Pulse Analysis

India’s Quality Control Orders, administered by the Bureau of Indian Standards, have become a pivotal gatekeeper for imported industrial goods. While the QCO framework aims to safeguard consumer safety and product quality, its rapid proliferation has outpaced the capacity of testing labs, inflating certification fees. The Foreign Manufacturers Certification Scheme adds layers of documentation, on‑site inspections, and mandatory sample testing, creating a compliance bottleneck that disproportionately affects low‑volume imports. This regulatory tightening mirrors broader global trends where governments tighten standards to protect domestic markets, but it also raises the stakes for trade partners seeking entry into one of the world’s fastest‑growing economies.

For MSMEs, the financial impact is stark. An upfront certification cost ranging between Rs 15 lakh ($16,000) and Rs 20 lakh can erode profit margins on specialised components, making imports economically unfeasible. Larger importers can amortise these expenses across high‑volume shipments, but smaller firms lack that scale, risking market exit. The resulting concentration favors conglomerates, potentially stifling innovation and reducing competition. Moreover, many Indian manufacturers rely on imported high‑precision inputs; inflated costs could disrupt supply chains, slowing the momentum of the Make in India initiative and raising the price of domestically assembled products.

GTRI’s policy recommendations align with best practices observed in jurisdictions that balance safety with trade facilitation. Capping routine testing fees would provide price certainty, while recognising accredited foreign laboratory reports could streamline verification processes. A shift to risk‑based testing—focusing intensive scrutiny on high‑risk categories and applying lighter checks to low‑risk items—would alleviate laboratory backlogs and lower costs. Conducting regulatory impact assessments before new QCOs are issued would ensure that future measures enhance quality without unintentionally hampering MSME participation, preserving a vibrant, inclusive manufacturing ecosystem.