India is moving towards opening a significant portion of its federal government procurement market to foreign firms, starting with the United States. This strategic shift follows the recent India-UK free trade agreement, which granted UK suppliers access to specific public sector contracts. Sources suggest the deal with the U.S. will cover federal contracts valued at over $50 billion.
Federal Contracts Now in Play
Currently, India’s total public procurement market is valued between $700 billion to $750 billion annually, but most of it is reserved for domestic players. Small businesses enjoy a 25% share. However, sectors like defence and railways have some exceptions. The proposed U.S. access will apply only to select federal projects, not to state or local contracts.
Reciprocal Access the Key
Officials say that the opening will be executed in a phased and reciprocal manner. Following the UK model, U.S. firms will gain access to federal-level tenders, while Indian firms may receive similar treatment under the U.S. procurement system. The UK deal allows UK-based suppliers to bid for Indian tenders above 2 billion rupees (about $23 million).
Push for Trade Deal with the U.S.
Trade Minister Piyush Goyal’s visit to Washington signals India’s urgency in finalizing a deal within the 90-day window following the temporary suspension of U.S. tariffs. The interim agreement is expected by early July. The U.S. had earlier criticized India’s procurement policies as restrictive and inconsistent.
Small Businesses Still Protected
Despite opening to foreign suppliers, the Indian government has assured domestic industry that 25% of public procurement contracts will remain reserved for small businesses. Industry leaders welcome the development, seeing it as a dual opportunity: protection for local SMEs and new overseas markets for Indian firms.
Conclusion: A Strategic Balancing Act
India’s calibrated move to open part of its protected procurement market shows a maturing trade posture. By linking access to reciprocity, New Delhi is aiming to balance local business interests with global trade ambitions — potentially reshaping its future economic partnerships.
