Under the new arrangements, UK companies bidding for certain Indian government contracts will be treated similarly to local suppliers and will have access to information on upcoming public tenders. Notably, the requirement for domestic input has been relaxed, allowing UK goods that contain as little as 20% Indian components to qualify for government procurement. This flexibility means UK businesses can source up to 80% of their materials from abroad, making it easier for them to compete in lower-value contracts previously inaccessible to them.
However, experts warn that realizing this potential will be challenging. While UK firms are now classified as Class-II suppliers, they will still be at a disadvantage compared to local Class-I suppliers, which retain preferential treatment. Additionally, UK products generally have higher pricing, making competition tougher.
Among the most daunting obstacles are issues related to delayed payments and contract enforcement, which have historically plagued public procurement in India. In a study conducted from 2017 to 2020, it was found that outstanding payments often exceeded annual procurement averages, illustrating persistent cash flow issues that especially affect smaller suppliers. UK firms entering India's market may struggle with time-consuming contracts rife with regulatory uncertainties.
Despite these hurdles, the entry of foreign entities into India’s public procurement signifies a significant change in policy. It reflects a broader intention by the Indian government to loosen restrictions that have long protected local small and medium-sized enterprises. This initiative may foreshadow a more accommodating approach in future trade negotiations, such as those currently underway with the United States. India's historical reluctance to engage in comprehensive public procurement clauses in trade agreements underscores how this recent development is an attempt to catch up. Trade experts view this shift as a sign of the Indian government’s confidence in its local firms' ability to compete on a global scale while improving bureaucratic accountability in procurement practices.
Despite the complexities, the hope is that increased competition will lead to better governance and transparency in India’s public procurement process, elevating it to international standards.
However, experts warn that realizing this potential will be challenging. While UK firms are now classified as Class-II suppliers, they will still be at a disadvantage compared to local Class-I suppliers, which retain preferential treatment. Additionally, UK products generally have higher pricing, making competition tougher.
Among the most daunting obstacles are issues related to delayed payments and contract enforcement, which have historically plagued public procurement in India. In a study conducted from 2017 to 2020, it was found that outstanding payments often exceeded annual procurement averages, illustrating persistent cash flow issues that especially affect smaller suppliers. UK firms entering India's market may struggle with time-consuming contracts rife with regulatory uncertainties.
Despite these hurdles, the entry of foreign entities into India’s public procurement signifies a significant change in policy. It reflects a broader intention by the Indian government to loosen restrictions that have long protected local small and medium-sized enterprises. This initiative may foreshadow a more accommodating approach in future trade negotiations, such as those currently underway with the United States. India's historical reluctance to engage in comprehensive public procurement clauses in trade agreements underscores how this recent development is an attempt to catch up. Trade experts view this shift as a sign of the Indian government’s confidence in its local firms' ability to compete on a global scale while improving bureaucratic accountability in procurement practices.
Despite the complexities, the hope is that increased competition will lead to better governance and transparency in India’s public procurement process, elevating it to international standards.
