In a significant escalation of trade tensions, President Donald Trump has ramped up his criticism of India’s tariff and non-tariff measures while also targeting its crude oil purchases from Russia.
His administration has responded to these concerns by implementing a hefty 50 percent tariff rate on Indian imports, a move that threatens to undermine the progress made over decades in fostering a strong partnership between the two nations.
Despite this increase in tariffs and the charged rhetoric, ongoing talks between New Delhi and Washington suggest both sides are still pursuing a potential trade deal aimed at restoring stability to their economic relationship.
The Indian government is considering possible tariff concessions, as well as increasing purchases of liquefied natural gas (LNG) and defense equipment from the United States, to strengthen its negotiating position.
Additionally, there appears to be a pathway toward finding common ground on quality control orders (QCOs), which President Trump has described as “strenuous and obnoxious.”
QCOs, which typically mandate certification by the Bureau of Indian Standards (BIS) before products can be sold in India, are often seen as a challenge by many Indian and international businesses.
These measures also frequently require that products undergo testing in local, BIS-certified laboratories before entering the market.
Various ministries issue QCOs tailored to specific product categories, with the Ministry of Chemicals and Fertilizers, for instance, overseeing orders related to chemicals.
While QCOs serve the noble purpose of ensuring product quality, safety, and performance for Indian consumers, they are often weaponized by New Delhi as a shield against anti-market practices, predominantly from Chinese firms.
The toy industry exemplifies the success of QCOs, which combined with increased import tariffs, have led to a significant reduction in China’s market share in India’s toy imports—from 94 percent in fiscal year 2013 to 64 percent in 2024.
This transformational shift has revitalized India’s toy manufacturing sector between fiscal year 2015 and 2023, seeing imports fall by over 70 percent while exports surged more than 60 percent during this timeframe.
Buoyed by this success, the Indian government accelerated the implementation of QCOs across various industries, including chemicals, steel, electronics, textiles, and footwear, increasing the number of QCOs from 14 in 2014 to a staggering 156 by this year.
However, these regulations often elicit frustration from businesses, both domestic and foreign, due to higher operational costs and increased complexities linked with accessing the Indian market.
For manufacturers based in India, QCOs can complicate sourcing essential components that may not be locally available, such as certain specialized printed circuit boards and compressors, adding particular strain on small and medium-sized enterprises.
These issues pose a significant challenge to India’s ambitions to attract global manufacturing supply chains and enhance its share in international trade.
Ironically, while targeting Chinese dumping, QCOs can inadvertently affect imports from other countries, including the United States, Japan, South Korea, and those in the European Union—key partners of India.
Thus, achieving a solution necessitates a better-targeted approach to QCOs to prevent undue collateral damage on manufacturers from both foreign nations and India’s own burgeoning economy.
China’s current dominance in many supply chains implies that even if imports from other countries ease, there’s no guarantee that Indian manufacturers will have guaranteed access to the necessary inputs.
Even if alternative sources exist, they might not be competitive with Chinese suppliers on price.
However, broadening sourcing options for Indian manufacturing could help alleviate some of the concerns associated with strict QCO regulations.
One of the most straightforward and impactful measures might involve exempting imports from countries other than China from QCO requirements, though it is unlikely to be politically acceptable for New Delhi.
Instead, India might look toward creative solutions during ongoing trade negotiations with the United States as a potential model for similar discussions with the European Union and other stakeholders.
Two innovative concepts highlight how QCOs could adapt to enhance sourcing flexibility while supporting India’s manufacturing sector and maintaining enforcement against low-quality imports.
First, India could implement a policy where imports that are “Made in USA,” (defined as products with sufficient value added in the United States) become exempt from the QCO guidelines. This would implicitly acknowledge the reputation and quality associated with American manufacturing.
Second, QCOs could feature clauses recognizing US standards and certifications, allowing products tested and certified in the United States to enter India without additional QCO restrictions.
This second approach would still protect Indian manufacturers against undercutting by Chinese suppliers while also allowing for imports from nations such as Mexico that meet US standards.
Navigating these complex negotiations requires careful attention to detail to ensure that both countries’ needs are met effectively.
Amidst an environment of heightened tensions, both nations remain committed to striving toward an agreement that could greatly enhance bilateral trade, seeking to achieve “Mission 500″—the ambitious goal of doubling trade to $500 billion by 2030.
This target was set forth in the joint statement made after a meeting between Prime Minister Narendra Modi and President Trump on February 13.
In conclusion, reaching an understanding on QCOs could play a critical role in finalizing a trade deal. Such an agreement would be pivotal in demonstrating mutual commitment on a significant non-tariff barrier while aligning with broader goals, including tariff negotiations, digital agreements, LNG and defense collaborations, and additional considerations.
Gopal Nadadur, a senior fellow at the Atlantic Council’s South Asia Center and senior vice president for South Asia at The Asia Group, emphasizes the importance of nuanced trade discussions.
image source from：atlanticcouncil
