Sharing more details on the India-UK FTA, Union Commerce and Industry Minister Piyush Goyal said that UK-based suppliers will be eligible to bid for government tenders only for orders of more than Rs 200 crore.
The Union Minister further added that market access to the UK under the FTA will be limited to the Non-sensitive central level entities only, and access for sub-central (state / local government) level entities is excluded.
He said for the first time, the UK agreed to take a binding commitment to provide non-discriminatory treatment to our suppliers under the UK’s Social Value regime in their public procurement system. India’s government procurement market is among the largest in the world, estimated at nearly $600 billion annually, which is around 15% of the country’s GDP.
Global Trade Research Initiative (GTRI) in a report suggested that India should approach the implementation of the Government Procurement (GP) chapter in the recently concluded India-UK Free Trade Agreement (FTA) with extreme caution.
It highlights potential risks to the domestic industry, especially Micro, Small and Medium Enterprises (MSMEs), due to increased foreign competition. India is now facing increasing pressure from its trading partners, particularly the UK and the European Union, to open up its GP market.
This demand has translated into a significant policy shift in the India-UK FTA, which includes a detailed GP chapter, the GTRI stated.
What Else For India And UK FTA?
Under the FTA agreement, India has agreed to allow UK firms to participate in central government tenders. Even those with just 20% UK content will be considered ‘Class 2 Local Suppliers’ under the Make in India framework. This designation was previously reserved for Indian firms with higher domestic content.
GTRI report warned that giving UK companies near-equal access to government contracts could push Indian MSMEs out of the market. These small businesses rely heavily on protected government procurement to sustain themselves.
Additionally, such a move could weaken one of India’s last few industrial policy tools used to encourage domestic production, innovation, and employment, warns GTRI. GTRI recommends that India should exclude strategic sectors–such as defence, railways, and core infrastructure–from foreign access to safeguard national interests and support local industry.
Beyond being a tool for public spending, government procurement serves as a strategic instrument to promote local manufacturing, strengthen MSME capabilities, and support national initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’.
Unlike some developed countries, India has not joined the World Trade Organization’s Government Procurement Agreement (GPA), thereby retaining its policy space to favour domestic firms. Under existing rules, 25% of all government procurements in India are reserved for MSMEs.
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