Two years after the government decided to bring in stricter and comprehensive product standards for at least 371 key import items, the Bureau of Indian Standards (BIS) has notified final standards for only a few items such as toys. The move had been aimed at reining in runaway imports, which had raised the merchandise trade deficit then, and are again on the rise now.
In January 2020, the commerce department had pushed for strict product standards for the import of items such as processed food, textiles, leather, toys, furniture, plastic goods, and articles manufactured mainly by micro, small and medium enterprises. Items like televisions, air-conditioners and refrigerators were also on the list.
The 371 items on the list accounted for nearly $127 billion or 26 percent of India’s annual imports back then in 2019-20, a senior official said. ”After considering a mandatory licensing regime for imports, tariff hikes and sectoral restrictions followed by anti-dumping investigations, the creation of stricter product standards was decided upon as the easiest and least controversial measure,” he said.
Standards are commonly used non-tariff measures in many countries to restrict imports when placing outright higher import duties on foreign goods isn’t feasible. It is an indirect way to cause a shift in import patterns.
In an ideal scenario, rigorously standardised products cost more to build and will lead to fewer foreign exporters selling them. Some will also have to raise prices to adjust their costs, thereby making the products more expensive for Indian importers, who would ultimately turn to domestic manufacturers.
The products identified for prescribing standards were spread across a wide range of India’s import categories and involved a number of ministries. As a result, a specific inter-ministerial joint committee had been created involving officials from the departments of chemicals and petrochemicals, heavy industries, the IT ministry, the Department for Promotion of Industry and Internal Trade, the steel ministry, and the telecom department.
However, sources say that despite several meetings held in early 2020, the committee was unable to accelerate the process. Eighteen core group meetings have been held by officials belonging to a cross-section of ministries on the matter.
People in the know say that BIS has too much on its plate. “The size of the workload is not at all commensurate with the number of trained officers and academic, research staff needed to establish product standards for so many items within such a time frame,” the official cited above said.
Not toying around
Instead, the body has doubled down on seizing non-standardised products for the few imports it has established norms for. This primarily involves toys. The standards prohibit the use of inflammable materials in toys and kids’ products, restrict the quantity of toxic elements like arsenic, barium, cadmium and lead, and mandate ISI certification marks to be imprinted on products across price ranges.
With effect from January 1, 2021, a quality control order issued by the department for standardisation now strictly monitors the quality adherence of toys. This followed a directive from the Prime Minister’s Office with regard to making India a global manufacturing hub for the sale and export of toys.
BIS has been issuing circulars and notices regularly in newspapers, urging merchants to sell only toys with the ISI mark. Last month, it raided and seized more than 1,000 products without the ISI mark in Kochi and more than 300 products in Hyderabad.
Long-term push
Ever since taking charge of the consumer affairs ministry, commerce and industry minister Piyush Goyal has directed BIS to go in for massive expansion and modernisation of testing labs so that entrepreneurs don’t have to travel far to get their products tested and for certification of standards.
Goyal has also asked BIS to sharply reduce the testing fee. The minister has said this will encourage small businesses to get their products certified and also encourage the ease of doing business.
With the trade deficit being a major issue in the first few years of the Narendra Modi government, India has hiked duties on over 3,500 tariff lines since 2014, a senior Indian Institute of Foreign Trade official said.
As a result, the commerce department has been hesitant to raise import duties, fearing higher prices will hurt manufacturers and exporters who rely on foreign inputs and are facing a liquidity crisis. Officials have also pointed out that more research is needed to see if domestic capabilities can be quickly ramped up or whether Indian importers can source goods from other nations if imports from China are suddenly restricted.
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