Indian IT and insurance firms among others will benefit as New Delhi has agreed to open up its huge government procurement market to European firms on the condition that Indian companies will get reciprocal access to the European government contracts.
According to official sources, at the recent India-EU ministerial meetings here, the two sides came around to the view that the area of government procurement will be part of the proposed bilateral investment and trade agreement (BITA) between the two.
In India, government purchases have largely remained the preserve of public sector undertakings, but of late, the sector has seen significant opening-up, with the introduction of more transparent bidding norms facilitated by the Central Vigilance Commission. Public procurement accounts for a quarter of India?s GDP. Central PSUs alone procured goods and services worth R8 lakh crore in 2008-09).
?Why can?t we allow the EU firms access to our government contracts provided the process of award is transparent? Our IT companies, especially those in the IT sector like Infosys and Wipro, will stand to gain substantially if they get access to European public procurement contracts in return,? said a senior government official on condition of anonymity. The 27-country union, currently facing an economic crisis including sovereign debt problems, is credited with a multi-billion market of government purchases estimated at 10-15% of the GDP of region.
India?s inclination to end the exclusivity for domestic firms when it comes to government purchases has been in evidence for the last couple of years although official posturing was somewhat at odds with this. The commerce ministry had a few months ago proposed a process for the country to join the agreement on government procurement (GPA), a plurilateral treaty under the World Trade Organisation (WTO).
The ministry had moved a Cabinet note, which suggested that India should acquire an ?observer status? in the GPA to begin with, and consider formally acceding to the agreement as and when climate is conducive.
There is also pressure from the US government for India to augment its public purchases from IT hardware majors like HP and Dell to reciprocate Indian software majors? access to the American market.
For European companies, India?s large government-supply contracts, especially in areas like infrastructure, construction and energy look attractive.
Indian firms in services – IT and insurance for example – would be able to rev up their revenue from overseas if allowed to bid for European government contracts.
Experts say if the proposal is implemented, at least sections of the Indian industry which has the ability to outbid their global peers on price and/or quality would gain meaningful access to the highly competitive market for government contracts in EU.
When contacted, leading IT firms Infosys and TCS refused to comment for this story.
The government official quoted above also added that in the services sector, Indian could be a net gainer, although he refrained from putting any figure to it.
The prime reason for the EU to show interest in the government contracts in India is the improvement in government procurement procedures in recent years through autonomous policy action and India?s enhanced engagement in the global drive for transparent bidding norms.