India Likely to Allow Government Contracts to Foreign Firms Including US Amid Trade Talks
India is preparing to open a significant portion of its protected government procurement market to foreign companies, including firms from the United States, according to two government sources. This represents a notable policy shift that could extend to other trading partners.
Recent developments indicate that India has granted British companies access to select federal contracts under a new trade agreement, as reported by news agency Reuters. The move comes in the context of ongoing trade negotiations between India and the United States.
According to the sources, US companies may be allowed to bid for contracts worth over $50 billion, primarily from federal entities, as New Delhi works to negotiate a trade deal with Washington. Total public procurement in India—including purchases by federal, state, and local governments, as well to state-owned enterprises—is estimated at $700 billion to $750 billion annually.
Currently, most of this market is reserved for domestic companies, with 25% specifically set aside for small businesses. Foreign suppliers are only allowed in limited sectors such as railways and defense when local alternatives are unavailable.
One official familiar with the matter stated that India has agreed to open its public procurement contracts gradually to trading partners, including the US, in a phased and reciprocal manner. The sources, who requested anonymity due to the sensitive nature of the negotiations, said only contracts linked to federal government projects—worth about $50 to $60 billion—would be opened to foreign bidders. State and local government procurement will remain closed to overseas firms.
Following the UK pact, India is ready to open a part of its public procurement market to the US as well, according to the second official. The Indian commerce ministry has not responded to requests for comment regarding the US proposal or the possibility of extending the initiative to other countries.
India has historically resisted joining the World Trade Organisation’s Government Procurement Agreement, citing the importance of safeguarding small enterprises. In a March report, the US Trade Representative flagged India’s restrictive procurement rules as a key barrier for US companies, citing “changing rules and limited opportunities.”
Union Minister Piyush Goyal visited Washington this week to push forward trade discussions, with both sides aiming to finalize an interim agreement by early July. The talks follow a 90-day tariff pause announced by US President Donald Trump on April 9, which includes a 26% duty on imports from India.
The Ministry of Commerce clarified that under the UK trade deal, British companies will only be allowed to bid on contracts from non-sensitive federal entities, excluding state and local government procurement. UK suppliers can participate in tenders above 2 billion rupees ($23.26 million), while the UK will offer Indian suppliers non-discriminatory access to its procurement system.
Anil Bhardwaj, secretary general of the Federation of Indian Micro, Small and Medium Enterprises (FISME), emphasized that Indian small businesses will still receive protection. “The government has assured small industry that a quarter of the orders will be reserved for them,” Bhardwaj said. “Opening procurement to foreign firms on a reciprocal basis offers an opportunity for Indian businesses in overseas markets as well.”