India Might Open Its $700 Billion Public Procurement Market to Foreign Firms, Including US Contract Bidders

India Set to Open Government Procurement Market to Foreign Firms

India is gearing up to grant access to its protected government procurement market to foreign companies, including those from the United States, according to two senior government officials cited in a recent Reuters report. The move is expected to allow US firms to compete for contracts exceeding $50 billion with federal entities in India.

Although most government contracts in India have historically been reserved for domestic companies, with a notable 25% set aside for small businesses, sectors like defence and railways already permit foreign procurement in the absence of local alternatives.

The decision to open up the market to foreign firms follows a recent trade deal between India and the UK, which facilitated British companies’ access to federal government contracts in specific sectors on a reciprocal basis. Officials are now considering extending similar opportunities to American companies as part of their ongoing trade negotiations.

While the liberalisation will initially focus on central government contracts valued at $50-60 billion for the US, purchases by state and local authorities will remain restricted to domestic bidders.

India’s reluctance to join the WTO’s Government Procurement Agreement, citing the need to safeguard its micro, small, and medium enterprises (MSMEs), has been a long-standing issue. Commerce and Industry Minister Piyush Goyal’s recent visit to Washington aimed to advance talks towards finalizing an interim agreement, mirroring the UK trade deal template.

Under the UK deal, British firms are eligible to bid for Indian tenders exceeding Rs 200 crore related to non-sensitive federal entities, while Indian companies will reciprocally gain access to Britain’s procurement framework.