The efficiency and efficacy of government instruments in implementing policy have been particularly problematic in India. For instance, the incentives, mostly fiscal, to boost been linked to investments, e.g., development rebate and later investment rebate; others have been linked to depreciation like higher depreciation rates for certain categories of plant and machinery; yet a host of other incentives have been in the form of various subsidies pertaining to backward areas and free trade zones; and various duty drawbacks and value based export licensing and so forth. Many of these systems of incentives have long since become dysfunctional, while others are still in force, but surprisingly there has never been any incentive linked to quality, when it is quality which may be regarded as the single most important and fundamental hindrance to our exports and industrial growth. Given the image of shoddiness usually associated with Indian products, for international buyers, the ISO 9000 series becomes vitally necessary in lowering the perceived risk in dealing with a newcomer in the international market. In this context, we suggest linking tax incentives to quality via ISO 9000. Such an incentive system, we argue, among other benefits will strike at a pivotal leverage point for change given the present situation and the overall thrust of economic policy in opening up the economy to speed up exports.
