Opening Up Govt Procurement To UK Firms Will Undermine The Interests Of MSMEs
India’s government procurement market is one of the largest in the world—estimated at nearly US$600 billion annually, or approximately 15 per cent of GDP.
Chennai: India’s commitment to open up the $600 billion central government procurement market to UK companies under the trade deal will adversely affect Indian MSMEs. However, Indian companies will not receive the same access into the UK's government procurement process.
India’s government procurement market is one of the largest in the world—estimated at nearly US$600 billion annually, or approximately 15 per cent of GDP. This procurement is made across infrastructure, healthcare, power, education, transport, and defence.
India had opted out of the WTO’s Government Procurement Agreement (GPA), preserving its right to favour domestic firms. Under current policy, 25 per cent of government contracts are reserved for MSMEs, with sub-quotas for SC/ST and women-owned enterprises to promote industrial indigenization, support job creation, and empower small enterprises that often depend on public contracts for survival and growth.
India has been under growing pressure from FTA partners—especially the United Kingdom and European Union—to grant national treatment to foreign firms. Government Procurement market was first opened in India-UAE FTA. But the UK becomes the first foreign country to have received legally guaranteed access to India’s central government procurement market at such a large scale.
UK companies can now compete for approximately 40,000 tenders each year—in sectors such as construction, healthcare, energy, and transportation. These firms will also gain free access to India’s e-procurement portal, making participation easier and more informed, finds GTRI.
“It also dilutes one of India’s last remaining industrial policy tools—government procurement preferences—used to promote domestic manufacturing, innovation, and jobs,” said Ajay Srivastava, founder, GTRI.
What’s more concerning is that UK firms with just 20 per cent UK content in their goods or services will now be classified as ‘Class 2 Local Suppliers’. This grants them the same eligibility to compete in tenders that are preferentially designed to promote Indian producers.
While UK companies gain broad access to India’s procurement system, Indian firms remain largely excluded from the UK’s closed and highly competitive GP market. With little reciprocal benefit, this sets a dangerous precedent for future FTAs and weakens India's leverage to defend domestic interests.
In the UK, only government procurement of £20 billion or less is awarded to foreign bidders. Indian firms, already lacking scale and familiarity with UK procurement rules, are unlikely to gain meaningful access to these markets.