ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Dangers for India

Government Procurement in the EU-India FTA

In the proposed free trade agreement with India, the European Union is demanding access to India's government procurement market for contracts above a certain cut-off value. This is a controversial demand since it will give EU companies the right to bid for all government purchase contracts.

The negotiations of a bilateral trade and investment agreement (BTIA) between India and the European Union (EU) are revealing escalating aspirations on both sides for an ambitious coverage. As both sides hope to conclude the agreement by the end of this year, the latest information is that the EU is demanding access to India’s government procurement market, a market which India has not committed to open under any of its current free trade agreements (FTAs) or at the World Trade Organisation (WTO). Are Indian manufacturers and service providers ready to compete with their European counterparts in this very lucrative market, which also serves as an effective social and development policy tool? What will Indian companies get in return in the European market and will India gain on balance? And how does this compare with India’s domestic laws regarding government procurement?

Government procurement (GP) or public procurement refers to purchases by government department/agencies of goods and supplies, services and construction and public works. In developing countries, the GP market represents roughly 15-30% of the total market and is lucrative for developed country companies. In India, estimates vary but the United Nations Conference on Trade and Development, India1 (UNCTAD India 2007) estimate puts it at 13.9% of gross domestic product (GDP) in 2007, while more recent estimates show this market is worth about $156 billion, about 12% of GDP.2 A basic estimate shows the Indian market to be worth Rs 8,00,255 crore or $142.9 billion.3

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