Opening India's Procurement: Opportunity or Threat for MSMEs?

The recent free trade agreement with the UK allows British firms to participate in India's central government procurement tenders, sparking concerns about the impact on Indian MSMEs. The Global Trade Research Initiative warns this could crowd out local businesses and set a precedent for future trade agreements.

The Global Trade Research Initiative (GTRI) has raised alarms over a new free trade agreement (FTA) allowing UK companies to bid on India's central government procurement tenders. GTRI emphasizes that this decision could disadvantage Indian micro, small, and medium enterprises (MSMEs), which traditionally rely on protected procurement contracts.

Under the agreement, British firms with as little as 20% UK content can be classified as Class 2 Local Suppliers under India's Make in India policy, granting them status once reserved for domestic companies. This move effectively extends India's preferential treatment of local businesses to foreign entities, sparking industry concerns.

GTRI's founder, Ajay Srivastava, warned that the agreement might weaken India's ability to defend domestic interests in future FTAs, particularly as Indian firms remain largely excluded from the UK's competitive procurement market. The group suggests excluding certain strategic sectors from foreign access and maintaining the ability to prioritize domestic suppliers to protect national interests.

(With inputs from agencies.)