India Mulls Opening Key Government Procurement Market to Foreign Companies

India is considering partially opening its central government procurement market to foreign companies, including US firms, according to media reports dated May 23, 2025. The move is reportedly under discussion between India and the US as part of a broader interim trade agreement.

As per several media reports published on May 23, 2025, India is preparing to partially open its tightly controlled government procurement market to foreign companies, including those from the United States (US). In an article published by Reuters, this move follows similar access granted to the UK by India under a recently concluded free trade agreement (FTA).

It must be noted that India’s Ministry of Commerce and Industry has not officially commented on the US negotiations or the potential for broader application of this policy.

Access for US firms for procurement contract under discussion

As of May 2025, India’s central government ministers are negotiating a trade pact with the US administration in Washington, D.C. Reports are emerging that discussions are reportedly underway to allow US-based companies to bid on national procurement contracts in India. These contracts would primarily involve central government projects, while state governments’ and local enterprises’ market procurement will remain off-limits to foreign bidders for now.

India’s total public procurement includes spending by central, state, and local governments as well as state-owned enterprises.

Source: Central Public Procurement Portal (CPPP) Newsletter, March 2025.

*NIC refers to the National Informatics Centre, a central government entity.

Public procurement tenders in India are largely reserved for its domestic players, with 25 percent of contracts earmarked for small businesses. It may be noted that certain sectors in India, like defense and railways, allow foreign procurement when domestic alternatives are unavailable.

Precedent set by India-UK trade deal

On May 6, 2025, India signed an FTA with the UK that included a provision granting British firms access to a specific central government procurement market. This access spans goods, services, and construction contracts and is offered on a reciprocal basis.

READ MORE: India-UK Free Trade Agreement Finalized

UK companies are expected to gain the right to compete for a defined portion of contracts, especially in construction, goods, and services. While specifics are pending, the agreement signals a shift towards more inclusive participation.

The deal would also extend preferential treatment to UK firms under India’s “Make in India” policy. UK companies with at least 20 percent domestic content could be classified similarly to Indian suppliers, allowing them better standing in central procurements. Those sourcing 50 percent or more from India may qualify for top-tier supplier status.

In India’s public procurement, supplier status classifies vendors based on the local content in their goods or services, affecting their eligibility and preference in government tenders:

• Class-I local supplier: 50 percent or above local content; gets top preference.
• Class-II local supplier: 20–50 percent local content; eligible but lower priority.
• Non-local supplier: Less than 20 percent local content; generally ineligible unless no local bids qualify.

Selective market opening

India, however, has confirmed that under the agreed FTA, UK suppliers will be limited to bidding on domestic contracts deemed Class-II local suppliers and only in non-sensitive sectors.

On February 18, 2022, India opened the government procurement segment to the UAE under the Comprehensive Economic Partnership Agreement (CEPA). Under that pact, UAE firms are allowed to participate in procurement tenders in India worth over INR 2 billion (US$23.44 million).

India lobbies for favorable trade agreement with the US

India’s Union Minister of Commerce and Industry, Piyush Goyal, traveled to the US on May 16, 2025, to advance discussions, with both sides aiming to finalize an interim trade agreement by early July. This timeline coincides with a 90-day pause on tariff hikes announced by US President Donald Trump on April 9 for major trading partners, including India. One of the key issues for US negotiators has been India’s historically restrictive procurement framework, which the US Trade Representative criticized in its March 2025 report as a barrier for American businesses.

Balancing MSME concerns in India

Despite the policy shift, the central government is reportedly considering measures to protect its domestic industry. As per media reports, the secretary general of the Federation of Indian Micro, Small, and Medium Enterprises (FISME) has assured that the central government will reserve 25 percent of public procurement orders for the small industry. Bhardwaj had emphasized that opening the procurement market to foreign firms on a reciprocal basis could create new opportunities for Indian exporters to access international government tenders.

Role of the Central Public Procurement Portal (CPPP)

To streamline and standardize the public procurement process at the central level, India has established the CPPP. This portal serves as a centralized platform for all central government departments, public sector enterprises, autonomous bodies, and other agencies to publish tender notices, contract awards, corrigenda, and related procurement information.

One of the key objectives of the CPPP is to provide a single-window access to procurement activities across different ministries and departments, making the process more accessible and transparent.

Procurement across central government ministries

Various ministries under the central government participate in public procurement, such as the following:

• Ministry of Defence
• Ministry of Home Affairs
• Ministry of Housing and Urban Affairs
• Ministry of Petroleum and Natural Gas
• Ministry of Railways

Each ministry or department typically operates its own finance or procurement division, which is responsible for managing the procurement processes. These divisions act as the primary point of contact for vendors seeking to engage in government tenders. While the structure and role of these procurement wings may differ between central and state governments, their function remains fundamentally similar.

(US$1 = INR 85.30)

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