India May Open Government Contracts to US, Foreign Firms: Sources

India Plans Gradual Opening of Protected Public Procurement to Foreign Companies

India is poised to allow select foreign firms, including those from the United States, to participate in government procurement contracts worth over $50 billion, marking a significant policy shift aimed at expanding trade partnerships. This move follows a recent free trade agreement with the United Kingdom, which granted British firms access to federal government contracts on a reciprocal basis. The phased opening is expected to extend to other trading partners over time, according to two government sources familiar with the ongoing negotiations.

The overall public procurement market in India—including federal, state, and local government agencies as well as state-owned enterprises—is estimated to be valued between $700 billion and $750 billion annually. Currently, most procurement is reserved for domestic companies, with a 25% reservation for small businesses, although sectors such as railways and defense already permit foreign suppliers when domestic options are unavailable.

Highlights:

• India to allow US firms to bid for government contracts worth $50 billion+.

• Public procurement market estimated at $700-$750 billion annually.

• Current reservations protect domestic firms and small businesses (25% quota).

• Policy shift follows India-UK trade deal opening some procurement sectors.

Limited Scope: Federal Contracts Opened, States Remain Excluded

The government sources emphasized that the opening will be limited mainly to federal government projects valued around $50-$60 billion. Purchases made by state and local governments will remain outside the scope of foreign participation. This carefully calibrated approach aims to balance international trade commitments with domestic economic priorities and protection of smaller enterprises.

Following the trade deal with the UK earlier this month, India appears ready to replicate similar reciprocal procurement access for the US, signaling growing willingness to engage in multilateral trade liberalization on government contracts.

Highlights:

• Foreign firms limited to federal government contracts; state/local excluded.

• Opening covers sectors including goods, services, and construction.

• Reciprocal arrangements with trading partners to guide future access.

• Procurement contracts above ₹2 billion (~$23 million) accessible to UK suppliers.

Strategic Trade Negotiations Accelerate Amid US Tariff Truce

Indian Trade Minister Piyush Goyal’s recent visit to Washington focused on advancing trade discussions with the US, aiming for an interim trade agreement by early July. This follows a 90-day pause announced by US President Donald Trump on tariff hikes, including a 26% tariff on Indian imports.

The move to open government procurement markets may form a key part of these negotiations, addressing long-standing US concerns over India’s restrictive procurement policies. The US Trade Representative’s March report highlighted barriers faced by American companies due to “changing rules and limited opportunities” in India’s government contracting.

Highlights:

• Interim India-US trade agreement targeted by early July.

• US suspended tariff hikes for 90 days for major trading partners.

• Opening procurement seen as a step toward easing US trade complaints.

• Commerce ministry confirms limited UK access but silent on US plans.

Domestic Industry Safeguards and Global Opportunities

Indian authorities have reassured small and medium enterprises (SMEs) that at least 25% of government procurement orders will remain reserved for domestic small businesses, a critical protection given the political sensitivity around liberalizing government contracts.

Industry bodies, such as the Federation of Indian Micro, Small and Medium Enterprises (FISME), view the opening of procurement markets as an opportunity for Indian firms to gain reciprocal access to overseas government contracts, potentially expanding export prospects.

Highlights:

• Small businesses guaranteed 25% reservation in government procurement.

• Reciprocal access could help Indian firms compete internationally.

• Indian commerce ministry maintains focus on protecting sensitive sectors.

• Gradual, phased approach aims to balance domestic interests with trade liberalization.

Currency Reference

• Exchange rate used: $1 = ₹85.98 Indian rupees