UK firms chase $38bn India contracts but challenges loom

Tue, Aug 12, 2025, 4:40 PM 5 min read

A standout feature of the India-UK free trade agreement signed last month was the Narendra Modi government's decision to open India's vast government procurement market to UK suppliers.

This typically includes a range of things the government buys - from goods and services to contracts for public works such as roads.

Some 40,000 high-value tenders worth £38bn from federal ministries will now be open to bidding for UK businesses in strategic sectors like transport, green energy and infrastructure - areas which have thus far been heavily protected from foreign competition.

The access is unprecedented, trade experts say.

It is "far greater" than what India had offered in its earlier agreement with the United Arab Emirates and "sets a new benchmark", Ajay Srivastava of the Global Trade Research Initiative (GTRI), a Delhi-based think-tank, told the BBC.

Under the agreement, UK firms bidding for Indian government contracts in specified areas will be treated almost on par with Indian suppliers and also have real-time access to information on forthcoming public tenders and procurement opportunities.

Also, goods from the UK made with just 20% domestic input can now be supplied to the Indian government, allowing UK companies the flexibility to source up to 80% of the parts or raw material from other countries and still qualify for procurement preference in India.

The minimum contract value at which these firms can bid for government projects has also been sharply reduced as a result of which "UK companies can now bid on a wide range of lower-value projects - such as rural roads, solar equipment for schools, or IT systems for government offices - that were previously out of reach", said Mr Srivastava.

But for British companies, realising this opportunity on the ground will be easier said than done, several experts told the BBC.

While UK suppliers are eligible to participate as Class-II local suppliers, Indian companies will continue to get preferential treatment as Class-I suppliers, says Dr Arpita Mukherjee, a trade expert with the Indian Council for Research on International Economic Relations.

Moreover, pricing plays a key role in winning contracts, and "UK companies tend to have higher prices" compared with Indian companies, which will be a major challenge for them, she adds.

A more significant deterrent will be delayed payments and difficult contract enforcement, which are "major legacy issues when it comes to public procurement in India", says Srijan Shukla of the Observer Research Foundation think-tank.