The UK hopes to gain a larger part of India’s government procurement business once the recently concluded India-UK free trade agreement (FTA) is implemented, as British businesses have been extended legally guaranteed access to compete for a proportion of government tenders, valued at £38 billion.
UK companies will get exclusive treatment under the ‘Make in India’ policy, which currently provides preferential treatment for government procurement to businesses who produce in India, a UK government’s report on the India-UK pact noted.
“India’s federal government entities covered by the agreement, publish, on average, approximately 40,000 tenders per year with a value of at least £38 billion ($50.7 billion)…UK businesses will have legally guaranteed access to compete for a proportion of these contracts that meet the criteria specified within India’s schedule,” according to details of the pact put out by the UK.
For the first time, UK businesses will be able to compete for a broad variety of goods, services, and construction procurements, for the majority of central government entities in India, as well as for several of India’s federal state-owned enterprises at thresholds lower than ever before, it said.
Experts, however, advise that India should retain the right to set and revise local content criteria, especially to prioritise domestic suppliers for national interest objectives. Extending state-level procurement or MSME-specific schemes to foreign suppliers should be avoided.
“India’s government procurement policy has served as a pillar of industrial and MSME development. Replacing its strategic flexibility with binding legal commitments under FTAs risks undercutting the very sectors that FTAs are meant to strengthen. The GP provisions in the India–UK FTA must be seen as a test case. If not implemented prudently, this agreement could become a template for future losses in policy autonomy,” according to a report by the Global Trade and Research Initiative.
UK companies will be treated as a class 2 supplier if at least 20 per cent of their product or service is from the UK, granting them the same status that only Indian firms currently enjoy, the UK report said.
While the government procurement market was first opened as part of the India-UAE FTA, the UK is the first foreign country to have received legally guaranteed access at such a vast scale, the GTRI report said.
India’s government procurement market is one of the largest in the world, estimated at nearly $600 billion annually, or approximately 15 per cent of GDP.