UK Firms Eye $38 Billion Indian Procurement Market Amidst Challenges

Thu Oct 23 2025 00:13:37 GMT+0300 (Eastern European Summer Time)

Following a landmark trade agreement, UK companies can now bid for Indian government contracts in various sectors, facing hurdles like pricing and contract enforcement.

The newly signed India-UK free trade agreement opens India’s public procurement market to UK firms, allowing them to bid on contracts valued at £38 billion. Despite the unprecedented access, UK companies face significant challenges, including pricing competition with local suppliers and issues related to delayed payments and contract enforcement. This shift reflects India’s intent to modernize its procurement processes and attract foreign competition.

In a landmark development, UK firms are now set to vie for a coveted slice of India’s burgeoning public procurement market, following a free trade agreement that opened doors to contracts worth approximately £38 billion. This significant opportunity covers a variety of sectors, including transportation, green energy, and infrastructure—areas traditionally restricted from foreign bids.

Experts characterize this level of access as unprecedented, likening it to a substantial enhancement over previous agreements, such as the one India secured with the United Arab Emirates. According to Ajay Srivastava from the Global Trade Research Initiative (GTRI), the newly established framework offers UK companies equal footing with Indian firms when bidding for government contracts.

With the agreement, UK businesses will now enjoy privileges including real-time information on public tenders and the ability to source a substantial portion of parts from abroad. Specifically, goods manufactured in the UK can be eligible for Indian government contracts if they contain just 20% domestic input, granting the flexibility needed for competitive sourcing.

However, the challenges for British businesses are not insignificant. While they may now participate as Class-II local suppliers, Indian firms maintain their Class-I status, allowing them preferential treatment. The price factor emerges as a critical hurdle, as UK companies typically command higher prices compared to their Indian counterparts.

Further complicating the landscape are issues such as delayed payments and challenging contract enforcement, which have historically plagued India’s public procurement system. Srijan Shukla from the Observer Research Foundation highlights that previous studies have indicated that pending dues can exceed total average annual procurements, posing significant liquidity challenges for suppliers, both local and foreign.

Despite India's recent efforts to bolster procurement transparency through initiatives like online dispute resolution portals, antiquated payment practices remain entrenched. While the new trade agreement emphasizes transparent processes, it conspicuously avoids addressing ongoing issues of payment delays and contract enforcement.

The ramifications of this shift could signify a crucial policy transformation, indicating the Indian government’s willingness to allow foreign participation in an area long guarded for domestic small enterprises. Analysts view this development as a precursor for future concessions in upcoming trade discussions with nations like the US.

India's engagement in enhancing its public procurement clauses signals a recognition of the need for modernization and competitivity in global trade dynamics. As both the UK and Indian firms adjust to this changing landscape, industry experts advise that understanding local practices will be vital for UK companies hoping to secure contracts in an increasingly complex regulatory environment.