President-elect Donald Trump has reiterated his intention to impose tariffs on Indian imports to the US, citing his long-standing concern over "unfair" trade practices. Trump often criticizes India for imposing high tariffs on American goods without reciprocal treatment. “If India charges us 100 percent tariffs, why do we charge them nothing?” he questioned.

However, Trump’s focus might be misplaced. The real issue with India’s trade policy lies not in its tariffs but in administrative hurdles that are less conspicuous yet equally restrictive. Many businesses operating in India today are more concerned about non-tariff barriers, particularly the increasing use of “Quality Control Orders” (QCOs). These regulations require imports to meet specific quality standards, but in practice, they have become tools to restrict imports and reduce competition.

India's commerce minister recently revealed that over 700 QCOs have been issued, with plans to increase this number to 2,500. These cover a wide range of products, from shoes and toys to steel and chemicals. Officials justify these measures as necessary to protect consumers from substandard imports, especially from China. However, these QCOs often affect imports from all countries and are applied unpredictably, causing confusion and delays. The Bureau of Indian Standards, responsible for certification, is overwhelmed by the surge in applications, creating bottlenecks in the process.

If India genuinely aimed to protect consumers, it could exempt goods already meeting stringent regulatory standards in markets like the European Union. The absence of such exemptions indicates that QCOs are designed to control imports while avoiding the political fallout of raising tariffs outright.

This approach echoes India’s pre-liberalization trade policies, which led to inflation, monopolies, struggling small businesses, and a decline in competitiveness. The consequences are already visible: domestic industries, such as garment manufacturers, are concerned about being forced to source raw materials locally, creating monopolies and driving up costs. Complying with QCOs is so expensive that smaller companies may find it unfeasible to use imported materials, further stifling growth.

The engineering sector also faces disruptions, with specialty steel imports stuck at ports due to compliance issues. These delays impact local manufacturers, who risk missing export deadlines. Such policies discourage companies from expanding their global reach, forcing them to limit their operations to the domestic market.

While Trump might view India’s trade policies as detrimental to the US, their primary victims are Indian businesses and consumers. The government’s well-intentioned efforts to create jobs and boost manufacturing are inadvertently undermining the very sectors that drive employment, such as garments and leather, while protecting large, capital-intensive industries. In the end, these self-defeating policies harm India more than its trade partners.

Disclaimer: This image is taken from Bloomberg