India May Open Government Contracts to Foreign Firms, Including U.S.
India is considering allowing foreign companies, including those from the United States, to bid for government contracts, according to two government officials, a move that could expand to other trading partners following a recent trade deal with the United Kingdom.
Under this policy shift, U.S. firms may be eligible to compete for contracts valued at over $50 billion, primarily from federal entities, as negotiations with Washington progress, the officials said. The government is exploring a phased and reciprocal approach to opening its public procurement market to international partners.
India’s public procurement sector, which includes federal, state, and local government contracts as well as state-run firms, is estimated to be worth between $700 billion and $750 billion annually. Most of this spending is reserved for domestic firms, with 25% allocated for small businesses. However, certain sectors like railways and defense allow foreign suppliers when domestic options are not available.
Earlier this month, India and the United Kingdom signed a free trade agreement that grants British firms access to federal government contracts in selected sectors, including goods, services, and construction, on a reciprocal basis.
“In a policy shift, India has agreed to open its public procurement contracts gradually to trading partners including the United States in a phased manner and reciprocal manner,” said one of the officials, with knowledge of the matter.
Only a portion of the federal government’s procurement contracts — primarily linked to federal projects valued at around $50 to $60 billion — will be open to foreign firms, while state and local government purchases will be excluded, the official said.
“Following the UK pact, India is ready to open a part of its public procurement market to the U.S. as well,” said a second official.
Both sources requested anonymity as details of the ongoing talks have not been made public.
The Commerce Ministry did not respond to requests for comment on the U.S. proposal or extending the plan to other nations.
India has historically resisted joining the World Trade Organization’s Government Procurement Agreement, citing the need to protect small businesses.
In its March report on foreign trade barriers, the U.S. Trade Representative said India’s restrictive procurement policies pose challenges for U.S. firms due to “changing rules and limited opportunities.”
Indian Trade Minister Piyush Goyal visited Washington this week to advance trade talks, with both sides aiming to sign an interim agreement by early July, officials said.
New Delhi is pushing to clinch a trade deal with the U.S. within the 90-day pause on tariff hikes announced by U.S. President Donald Trump on April 9 for major trading partners, which includes a 26% tariff on imports from India.
The Commerce Ministry said in a text message that U.K. firms would only be allowed limited access to bid for contracts of non-sensitive federal entities, excluding state and local government procurement.
U.K.-based suppliers can bid for Indian tenders above 2 billion rupees ($23.26 million) while the U.K. will offer non-discriminatory access to Indian suppliers under its public procurement system, the Ministry said.
The government has assured small industry that a quarter of the orders will be reserved for them, said Anil Bhardwaj, secretary general of the Federation of Indian Micro, Small and Medium Enterprises (FISME), a leading industry body.
“Opening procurement to foreign firms on a reciprocal basis offers an opportunity for Indian businesses in overseas markets as well,” he said.