UK firms are now allowed to bid for a share of £38 billion in Indian government contracts following a new trade agreement that opens India's previously protected procurement market. However, challenges such as payment delays and pricing disparity could hamper their success.
UK Firms Target $38 Billion Indian Government Contracts Amid Challenges
UK Firms Target $38 Billion Indian Government Contracts Amid Challenges
UK businesses eye unprecedented access to India's government contracts, yet obstacles remain significant.
The UK firms have their sights set on £38 billion worth of tenders in India following the recent trade agreement which promises to level the playing field for foreign suppliers in the Indian government procurement sector. With this development, the Modi administration has initiated a notable shift, allowing UK businesses to compete for contracts in vital areas such as transport, green energy, and infrastructure, which have traditionally been dominated by local companies.
Experts have praised the deal as a watershed moment. Ajay Srivastava from the Global Trade Research Initiative referred to it as setting a "new benchmark," offering access that far exceeds prior deals such as that with the UAE. UK suppliers can engage in bidding almost on equal terms with Indian companies, benefiting from real-time insights into public tenders and a more relaxed requirement of 20% local content for qualifying products.
Despite this newfound opportunity, experts caution that British firms may struggle to translate potential into actual contracts. Dr. Arpita Mukherjee highlighted that while they qualify as Class-II local suppliers, Indian companies continue to receive preferential treatment as Class-I suppliers. This could skew the competitive landscape in favor of local players, mainly due to UK firms' generally higher pricing.
Moreover, obstacles stemming from India's public procurement legacy, including slow payment processes and challenges in contract enforcement, could pose barriers for UK companies. As noted by Srijan Shukla of the Observer Research Foundation, longstanding payment delays have often shortchanged suppliers and disrupted market dynamics, with pending dues sometimes exceeding annual procurement averages.
India's lackluster ranking in contract enforcement — 163 out of 190 according to the World Bank's 2020 Doing Business report — reflects these ongoing struggles. Even with improvements in transparency through platforms like the Government e-Marketplace, payment discipline from government entities remains an issue, complicating matters for foreign entrants.
The recent trade deal, however, signifies an important policy shift by the Indian government, moving towards a more open market that has historically favored local small and medium enterprises. This could hint at a growing willingness by the Narendra Modi administration to make concessions in future agreements, especially with negotiations ongoing with the US.
While India's late embrace of significant government procurement clauses indicates a reactive approach, it underscores the government’s belief in the competitive capabilities of domestic firms on international platforms. As foreign firms enter this uncharted territory, the hope is that they will foster greater accountability and push for standardization within India's public procurement processes, ultimately aligning them more closely with global expectations.
Experts have praised the deal as a watershed moment. Ajay Srivastava from the Global Trade Research Initiative referred to it as setting a "new benchmark," offering access that far exceeds prior deals such as that with the UAE. UK suppliers can engage in bidding almost on equal terms with Indian companies, benefiting from real-time insights into public tenders and a more relaxed requirement of 20% local content for qualifying products.
Despite this newfound opportunity, experts caution that British firms may struggle to translate potential into actual contracts. Dr. Arpita Mukherjee highlighted that while they qualify as Class-II local suppliers, Indian companies continue to receive preferential treatment as Class-I suppliers. This could skew the competitive landscape in favor of local players, mainly due to UK firms' generally higher pricing.
Moreover, obstacles stemming from India's public procurement legacy, including slow payment processes and challenges in contract enforcement, could pose barriers for UK companies. As noted by Srijan Shukla of the Observer Research Foundation, longstanding payment delays have often shortchanged suppliers and disrupted market dynamics, with pending dues sometimes exceeding annual procurement averages.
India's lackluster ranking in contract enforcement — 163 out of 190 according to the World Bank's 2020 Doing Business report — reflects these ongoing struggles. Even with improvements in transparency through platforms like the Government e-Marketplace, payment discipline from government entities remains an issue, complicating matters for foreign entrants.
The recent trade deal, however, signifies an important policy shift by the Indian government, moving towards a more open market that has historically favored local small and medium enterprises. This could hint at a growing willingness by the Narendra Modi administration to make concessions in future agreements, especially with negotiations ongoing with the US.
While India's late embrace of significant government procurement clauses indicates a reactive approach, it underscores the government’s belief in the competitive capabilities of domestic firms on international platforms. As foreign firms enter this uncharted territory, the hope is that they will foster greater accountability and push for standardization within India's public procurement processes, ultimately aligning them more closely with global expectations.
