Opening government procurement market in India-UK FTA triggers concerns

A key provision in the recently sealed India-United Kingdom free trade agreement (FTA) opening India’s central government procurement (GP) market—worth nearly $600 billion annually—to extensive participation by UK companies has triggered concern among trade experts and industry stakeholders.

Under the deal, UK firms can bid for about 40,000 tenders each year in sectors such as healthcare, energy, construction, and transport.

They are also granted free access to India’s e-procurement portal, easing their entry into one of the world’s largest public procurement markets.

Critically, UK suppliers with just 20% domestic content will now qualify as ‘Class 2 Local Suppliers’ under the Make in India procurement policy—a designation previously reserved for Indian firms.

This effectively extends preferential treatment, designed to boost domestic manufacturing, to foreign bidders.

Analysts cautioned that the move could severely undermine Indian micro, small, and medium enterprises (MSMEs), which depend on reserved access to government contracts.

“This erodes one of India’s last policy tools to support local manufacturing, innovation, and employment,” said Ajay Srivastava, founder of think tank Global Trade Research Initiative (GTRI).

India’s current procurement policy reserves 25% of central contracts for MSMEs, with sub-quotas for SC/ST- and women-led businesses.

In defense procurement, 25% of components must be sourced from Indian MSMEs.

India has also stayed out of the World Trade Organization’s Government Procurement Agreement to maintain flexibility in favoring domestic firms.

While India previously offered limited procurement access to the UAE, the UK deal marks the first time a foreign country has secured legally binding, large-scale access to central government tenders.

The trade-off, however, appears imbalanced.

Indian firms face major barriers in the UK’s own procurement market, which remains highly restrictive and competitive. Less than 0.5% of European Union public procurement goes to non-EU vendors, and UK data shows under £20 billion annually is awarded to foreign bidders, Srivastava said.

“This lack of reciprocity sets a troubling precedent for future FTAs and weakens India’s negotiating leverage,” he said.

GTRI’s report recommends a cautious approach to implementing the GP chapter, urging the government to exclude sensitive sectors such as defense and core infrastructure from foreign access, preserve the right to adjust local content requirements, avoid extending MSME-specific schemes to foreign players, and regularly assess the real impact of UK participation.

India’s procurement framework has long served as an industrial policy lever to build domestic capacity and drive national programs like Make in India and Atmanirbhar Bharat.

Turning this flexible tool into a binding FTA commitment could undermine the very sectors such agreements are meant to strengthen, Srivastava added.