📰You Should Know About India's QCO Rollback | Daily India Briefing

Today, we explain why, India’s rollback of QCOs, or quality control orders, is an instrumental move for the country’s economic growth and trade relations.

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Macro

• Economists believe 8.2 percent q-o-q GDP growth slightly dampened RBI rate cut odds. The growth came as a surprise given the geopolitical backdrop. Before the print, the consensus was a 25 basis point cut with some clamoring for 50, though the odds have shifted closer to between a pause and small cut. Yearly growth forecasts were raised by most banks to 7.2 percent. 

• The current account gap widened to $12.3 billion (₹1.1 trillion) or 1.3 percent of GDP last quarter. The gap was actually smaller than expected due to strong services and remittances. While exports continued to decline, particularly to the US, imports rose due to strong metals prices. 

• The RBI was forced to sell dollars when the rupee hit a new record low at 89.7.Even with incredible growth, uncertainty over a trade deal and a widening current account made the rupee decline.

Equities

• The Nifty and rupee both sold-off in lockstep, showing overall uncertainty. The combined moves likely originate from foreign traders unsure of what Trump’s future with India will look like, causing foreign sales. 

• Temasek-backed Atomberg is planning a $200 million (₹17.9 billion) IPO. The consumer electronics firm is planning on issuing new and secondary shares. The company started as just a fan manufacturer but also does water purifiers, smart locks, and mixer grinders now.  

• SEBI reclassifying REITs as normal securities has led to outperformance over the Nifty.In the past, REITs were ‘hybrid’, meaning that fund managers could only allocate 10 percent of funds to the asset class.

Alts

• Delhi locals are having to fight pollution themselves with air purifiers. The market is expected to reach $1 billion (₹89.5 billion) by 2030 compared to under $160 million (₹14.3 billion) in 2022. Businesses are piggybacking on the idea and introducing derivatives that people can carry around with them as well. 

• Indian Oil Corp and Bharat Petroleum bought non-sanctioned Russian Urals for January. The delivery is $5 (₹447.5) cheaper per barrel than equivalent Brent crude. Total Russian buying is expected to be a third of 2025 for the upcoming new year. 

• Indian traders are buying longer-dated soy futures at a discount.Traders have locked in 150,000 tons from South America for April to July 2026; there is an unusual $25 (₹2,238) discount per unit for those futures right now. The market is sensing palm shortages from Indonesia for next year, making now a prudent time to stock up.

Policy

• Rajasthan's rejection of a coal power plant is forcing other states to think more green. Now, coal-fired plants are not even the cheapest option as compared to renewable battery plants. Regulators in Rajasthan also cited that coal plants are under utilized in the state. 

• Finance Minister Sitharaman is planning new levies on tobacco products. The bill is proposing a tax on the sale of machines that make ‘pan’, an Indian snack with tobacco. The tax is linked to the production of machines rather than the quantity of pan sold. 

• India is planning to pitch a new arms deal focused on jets and a missile defense shield with Putin's visit this week.A potential agreement on this arms deal could further set back US FTA negotiations, given that Russia has been a sticking point so far.

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The QCO Rollback Explained

For most of the past decade, India’s trade posture drifted quietly but unmistakably toward protectionism. Tariffs crept upward each year, reversing nearly two decades of liberalization, and a new class of regulatory barriers emerged to throttle imports without the political visibility of overt duties. The most consequential of these were the QCOs which ostensibly sought to keep out “sub-standard” Chinese goods but in practice created an interventionist and distortionary regulatory regime. 

QCOs were always more a political instrument than an economic tool. With rising Chinese imports and a leadership determined to project economic nationalism, the government framed these standards as necessary to ensure product quality. But the mechanism functioned less like a quality filter and more like a sprawling administrative dragnet. Between ministries encouraged to craft product-specific definitions and inspectors empowered to interpret rules with maximal discretion, the system ballooned into a free-for-all: around 800 new orders issued within barely a year, with plans to expand that number to 2,500. Compliance became prohibitively expensive, leading smaller firms to simply abandon imports.

The deeper problem was institutional, not tactical. Indian bureaucracy has never been capable of “light-touch” regulation; once officials are given discretionary power, intervention tends to metastasize. QCOs illustrated that pattern with mathematical precision since no coherent logic governed which goods were targeted or why, and ministries layered on standards with little transparency or interagency coordination. India’s trading partners became increasingly vocal about the unpredictability, with both the EU and the US warning that these barriers made the Indian market look unreliable and structurally hostile to foreign firms. 

What makes the current rollback notable is not only its rarity but its political context. The government is generally reluctant to reverse course once it has built a policy position, particularly a nationalist one. That dynamic made the emergence of a reformist push (driven by senior bureaucrat Rajiv Gauba) surprising. Tasked with assessing India’s competitiveness in a time shaped by tariffs and tightening global protectionism, Gauba reportedly identified QCO proliferation as a self-created bottleneck hampering domestic firms more than foreign rivals. Ministries have already begun dismantling their standards, with the steel ministry withdrawing over 50 of its 151 QCOs.

The rollback centers on intermediate inputs like minerals, polymers, and other materials crucial to SMEs. These firms are unable to absorb the compliance costs, dependent on imported inputs, and exposed to the inflationary impacts of Trump’s 50 percent tariffs on Indian exports. Restricting imports of these materials did nothing to protect domestic industry, instead it just raised its cost structure. 

Unfortunately, India’s bureaucracy is still defending parts of the system, insisting that quality concerns justify intervention. But if the government truly wants to keep out unsafe Chinese products, it can adopt a more rational approach by exempting goods that already meet rigorous standards in Japan or the EU. 

Ultimately, this episode reflects the desire to appear economically nationalistic without the institutional capacity to execute interventions cleanly. For years, no Indian voter blamed the government for the occasional low-quality import. But they will certainly notice if protectionism raises prices on essentials, especially in a country where e-commerce has trained hundreds of millions of consumers to be hyper-sensitive to cost.

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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