India-UK Trade Pact Opens NHS, Procurement to Indian Drugs & IT Firms

K N Mishra

    26/Jul/2025

What’s Covered Under the Article

  • Indian companies can now bid for UK government procurement contracts, including NHS supplies, through India–UK trade pact

  • UK suppliers may find India’s L1 tender system, local sourcing rules challenging despite mutual market access granted

  • Sensitive sectors like defence, railways, agriculture excluded in the India–UK agreement to protect national interests

The India–United Kingdom Free Trade Agreement (FTA), officially signed on July 24, 2025, marks a historic turning point for both nations by enabling mutual access to government procurement markets for the first time in any of India’s bilateral trade deals. This strategic move under the Comprehensive Economic and Trade Agreement (CETA) opens substantial opportunities, particularly for Indian pharmaceutical and software service providers, while British firms are expected to face structural hurdles in the Indian procurement landscape.

Indian Firms to Access UK’s $122 Billion Procurement Market

Under the newly signed pact, Indian businesses will gain access to the UK’s £95 billion (approximately ₹122 billion) public procurement market, including high-value segments like the National Health Service (NHS). Indian companies can now bid for contracts above a threshold of ₹1.6 crore, making it a major breakthrough for sectors like Active Pharmaceutical Ingredients (APIs), generics, software exports, technical textiles, and office equipment.

The NHS, which is among the world’s largest public healthcare procurement bodies, has been included in the list of eligible UK public sector buyers. This could transform India’s export potential in the pharmaceutical domain, especially since Indian APIs and generics already account for nearly 25% of NHS prescriptions.

According to a statement from the Indian Ministry of Commerce, the deal is expected to "significantly enhance NHS procurement of Indian pharmaceutical products", including high-end generics, which will now be available through a streamlined tendering process.

Software, Tech Services and Technical Textiles to Gain Traction

Besides the pharmaceutical sector, Indian software service providers are seen as big beneficiaries of the relaxed procurement norms. The UK government and its agencies rely heavily on outsourced digital solutions, and Indian firms—already known for cost-effective and high-quality tech solutions—are well positioned to expand their footprint in this segment.

Agneshwar Sen, Trade Policy Leader at EY India, noted, "If Indian firms meet the required quality standards and procurement criteria, they are likely to dominate, especially in services where India already has a comparative advantage." He also highlighted technical textiles and office automation solutions as emerging categories that could benefit under this framework.

Challenges Await UK Suppliers Entering Indian Public Contracts

While Indian firms are being welcomed into the UK market with relatively low entry barriers, the reverse scenario is more complex. Despite access to India’s ₹114 billion government procurement market, British suppliers may struggle to gain a competitive edge.

India’s L1 procurement system—which awards contracts to the lowest bidder—has been identified as a significant challenge for UK companies. Given the cost-sensitive nature of most public contracts in India, British firms may find it difficult to match India’s pricing benchmarks.

Although the agreement classifies UK entities with at least 20% local content as Class-II suppliers, granting them parity with Indian firms under the Public Procurement (Preference to Make in India) Order, this measure may not sufficiently offset the price disadvantages faced by UK companies.

Sen added, "The UK suppliers may enjoy theoretical access, but practical hurdles like pricing norms, transparency issues, and local sourcing mandates will restrict their participation in actual bidding processes."

Sensitive Sectors Excluded from the Agreement

Both nations have exercised strategic caution by excluding certain critical sectors from the agreement. On the Indian side, exclusions include:

  • Indian Railways

  • Food Corporation of India (FCI)

  • Handloom and Cottage Industries

  • National Industrial Corridor Development Corporation Limited (NICDC)

  • Defence-related procurement

  • Procurement under MSME-specific policies

  • Agricultural subsidies and food grain procurement programs

Similarly, the UK has excluded:

  • UK Space Agency procurement

  • Defence and security sectors

  • Public utilities like energy, transport, postal, and drinking water services

  • Agricultural product procurement

These exclusions reflect a pragmatic approach to safeguard national interests while facilitating open trade in non-sensitive sectors.

What the Deal Signifies for Bilateral Relations

This government procurement chapter is being hailed as one of the most ambitious clauses of any Indian FTA to date. While India has previously resisted opening public procurement in multilateral forums such as the World Trade Organization's Government Procurement Agreement (GPA), this bilateral agreement with the UK represents a calibrated shift in India's global trade posture.

The deal also reflects the UK’s strategy to diversify trade partners post-Brexit and tap into fast-growing economies like India. For India, it signifies a matured position in global trade negotiations, choosing selective openness where it aligns with national strengths.

Potential Roadblocks and Monitoring Mechanisms

Trade experts warn that effective monitoring and dispute redressal mechanisms will be crucial for the smooth implementation of this procurement agreement. There are also calls to ensure greater transparency in tendering procedures, especially in India, to avoid bureaucratic bottlenecks and foster genuine competition.

Both nations have agreed to establish a Joint Procurement Committee to oversee the execution of this chapter, address grievances, and resolve procedural disputes in a time-bound manner.

Conclusion

The India–UK Free Trade Agreement’s government procurement chapter marks a pivotal advancement in bilateral economic relations, potentially unlocking billions in trade value. While Indian firms are likely to gain immensely from access to UK’s procurement networks—especially in healthcare, technology, and manufacturing—the UK’s path into India’s public markets remains fraught with regulatory and competitive challenges.

Nevertheless, the deal stands as a template for future FTAs, showcasing India’s willingness to embrace limited liberalisation in sectors where it maintains global competence, while shielding its domestic priorities through carefully crafted exclusions and thresholds.


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