India to Allow US Firms to Bid for ₹4.29 Lakh Crore Government Contracts: Report

India is poised to open its federal public procurement market to US-based firms, allowing them to bid for contracts worth over ₹4,29,150 crore (approximately US$ 50 billion). This development forms a key part of ongoing trade negotiations between New Delhi and Washington, aimed at expanding bilateral commercial cooperation.

This initiative mirrors a similar agreement India recently signed with the United Kingdom, allowing British firms selective access to Indian federal contracts. These developments indicate a strategic policy evolution, with India signalling its intent to offer reciprocal access to its vast public procurement ecosystem.

India’s Procurement Market: Size and Scope

India’s total public procurement market, which includes central and state governments, municipalities, and state-owned enterprises, is valued at an estimated ₹60,08,100 to ₹64,37,250 crore ($700 to $750 billion) annually. Traditionally, a significant portion of these contracts has been reserved for domestic firms in an effort to support local industry.

However, there have been exceptions. Sectors such as railways and defence have historically been permitted to source from foreign suppliers, particularly in scenarios where suitable domestic alternatives are not available.

What the Agreement Entails

Under the proposed arrangement, US firms would be allowed to participate in tenders issued by non-sensitive federal government entities. State and local procurement, however, will remain outside the scope of this access.

This structure closely resembles the UK arrangement signed earlier in the month. As part of that deal, British suppliers can bid for Indian federal tenders in goods, services, and construction, provided the contract value exceeds ₹199.6 crore ($23.26 million). In exchange, Indian companies will receive non-discriminatory access to UK public procurement.

Read More: India's GeM Goes Global: UK Firms Can Access ₹3,800 Crore Procurement

Impact on Indian Micro and Small Enterprises

Despite opening up to foreign bidders, India remains committed to protecting its domestic micro and small enterprises. According to Mr. Anil Bhardwaj, Secretary General of the Federation of Indian Micro, Small, and Medium Enterprises (FiSME), 25% of government procurement orders will continue to be earmarked for small industries. This ensures a balance between internationalisation and domestic support.

Conclusion

This move marks a significant departure from India’s traditionally protectionist stance on government procurement. By allowing reciprocal access for foreign firms, India is not only facilitating greater competition but also seeking to enhance access for Indian businesses to overseas markets.

As India continues to deepen its economic ties with major global economies, such policy shifts could set the stage for broader trade agreements and a more integrated role in global supply chains.

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