India's public procurement market runs into several lakh crore rupees a year, and the Government e-Marketplace alone recorded a gross merchandise value of roughly Rs 5.4 lakh crore in FY 2024-25. For a foreign business, that scale is genuinely attractive. But India's government procurement rules for foreign businesses are built around domestic preference, security screening, and platform-specific procedure, not open market access. A foreign bidder that assumes it can approach an Indian government tender the way it would in the EU or the US will usually run into friction it didn't anticipate, sometimes at the eligibility stage, before price or quality even enter the conversation. This piece sets out how the framework actually works, where foreign bidders get tripped up, and what a general counsel evaluating this market should check first, drawing on insights from Rajesh Sivaswamy, who advises on international trade and government procurement matters at KSK. 

Why This Market Doesn't Work Like Open Tendering Elsewhere

Government procurement in India sits on a foundation built for domestic policy objectives as much as commercial efficiency. Two threads run through almost every tender: a preference for Indian-made goods and services, and, since 2020, a security-driven registration requirement for bidders from countries that share a land border with India.

The practical result is that "foreign business" isn't one category. A US or European company bidding through an Indian subsidiary with substantial local manufacturing sits in a very different position from a company incorporated in, or substantially controlled from, a country like China, Pakistan, or Bangladesh. The rules treat these situations differently, and a legal team that doesn't map its own corporate structure against these categories early can lose eligibility before the technical bid is even opened.

The Legal Mechanics: GFR, GeM, and the Rules That Actually Govern a Bid

Three frameworks matter most for a foreign business assessing this market.

The General Financial Rules, 2017 (GFR), administered by the Department of Expenditure and periodically amended (most recently through 2025 and 2026 updates), set the baseline procedure for how government departments procure goods, services, and works. Most central government purchases now route through the Government e-Marketplace (GeM), which has become effectively mandatory for central procurement and increasingly used by state governments and public sector undertakings as well.

Rule 144(xi) of the GFR, inserted through a Department of Expenditure order dated 23 July 2020, requires any bidder from a country sharing a land border with India, including China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan, to register with a Competent Authority (a Registration Committee constituted by the Department for Promotion of Industry and Internal Trade) before being eligible to bid at all. Insertion of Rule 144(xi) in the General Financial Rules 2017 — DoE OM dated 23.07.2020. Registration requires political and security clearance from both the Ministry of External Affairs and the Ministry of Home Affairs, and this applies not just to entities incorporated in those countries but to subsidiaries and entities "substantially controlled" through them. This is a genuinely different bar from ordinary commercial due diligence, and it catches structures that founders sometimes don't think to flag: a foreign parent with a controlling shareholder domiciled in a border country can trigger this requirement even where the bidding entity itself is registered elsewhere.

The Public Procurement (Preference to Make in India) Order, 2017, as amended in 2020, is the other pillar. It classifies suppliers by local content: a Class-I local supplier has at least 50% local content, a Class-II local supplier has between 20% and 50%, and anything below 20% is a non-local supplier. Where a Class-I local supplier is available and its price is within the prescribed margin of purchase preference (generally 20%) of the lowest bid, that supplier gets the contract regardless of a lower non-local bid. In many procurement categories, non-local suppliers are excluded from bidding altogether unless the item falls outside the local content thresholds set by the relevant nodal ministry.

A Practitioner's-Eye View: Where Foreign Bidders Get Stuck

In matters we've handled, the recurring issue isn't the headline restriction, it's the structuring decision a foreign business makes long before it ever files a bid.

A composite scenario we see fairly often: a European industrial equipment manufacturer wants to supply a state government infrastructure project. It has no Indian manufacturing presence and plans to bid directly from its home entity, assuming the contract value is large enough that a global tender enquiry route will apply. What the commercial team hasn't accounted for is that even where global tendering is permitted, the Make in India preference framework still applies to how bids are evaluated once they're in, and a Class-I local Indian competitor bidding within the purchase preference margin can still win the award over a materially cheaper foreign bid. This is a dynamic that also comes up in trade-agreement negotiations themselves; our analysis of government procurement provisions under the India-UK FTA covers how these access questions are being negotiated at the treaty level for UK bidders specifically. By the time a company outside such a framework becomes aware of the local preference dynamic, it has already spent months on a bid that was structurally disadvantaged from the outset. 

In our view, foreign businesses that treat Indian public procurement as "compete on price, structure later" are working backwards. The smarter sequence, in the deals we've advised on, is to decide upfront whether local manufacturing, a joint venture with an Indian Class-I supplier, or a licensing arrangement changes your competitive position enough to justify the investment, before the tender is even published.

Common Mistakes and Misconceptions

• Assuming "foreign bidder" is a single legal category. Land-border country status, local content percentage, and ordinary foreign incorporation all trigger different, non-overlapping rules.
• Missing beneficial ownership exposure under Rule 144(xi). The restriction reaches entities substantially controlled through a land-border country, not just those incorporated there. Group structures with layered holding companies need a proper look, not a superficial nationality check.
• Not registering on GeM early enough. Since GeM is the default channel for most central procurement, a foreign business that waits until it identifies a specific opportunity often finds the registration and compliance runway too short to meet the tender timeline.
• Underestimating the purchase preference margin. A foreign bidder quoting the lowest price can still lose to a Class-I local supplier bidding within roughly 20% of that price, a mechanism that surprises teams used to strict lowest-bid-wins systems.
• Treating the Make in India Order as static. Nodal ministries can, and do, set higher local content thresholds than the Order's default 50%/20% split for specific sectors, so the applicable bar varies by what's being procured.

What Foreign Businesses Should Do Now

• Map your corporate structure, including beneficial ownership, against Rule 144(xi) before committing resources to any tender, particularly if any group entity has links to a land-border country.
• Decide early whether local content, through manufacturing, assembly, or a joint venture with a Class-I Indian supplier, changes your competitive position enough to be worth pursuing.
• Register on GeM well ahead of any specific opportunity; the registration and verification process is not something to start once a tender is live.
• Confirm which procurement route applies to your target opportunity, GeM, a limited tender, or a global tender enquiry, since eligibility and local preference rules apply differently across each.
• Where the deal size justifies it, get a read on the specific nodal ministry's local content threshold for that product or service category rather than relying on the Order's default percentages.

Frequently Asked Questions

Q: Can a foreign company bid directly in an Indian government tender without an Indian subsidiary? It depends on the procurement route and the specific tender conditions. Global tender enquiries do permit direct foreign bidding in some cases, but the Make in India local content preference still applies to how bids are evaluated, which can disadvantage a foreign bidder even where it's technically eligible.

Q: What is Rule 144(xi) and does it apply to us? Rule 144(xi) of the General Financial Rules, 2017 requires bidders from countries sharing a land border with India, including China and Pakistan, to register with a government Competent Authority before bidding. It extends to subsidiaries and entities substantially controlled through such countries, so it's worth checking your full ownership chain, not just your place of incorporation.

Q: What does "local content" mean under the Make in India procurement order? Broadly, it's the value added within India as a proportion of the total value of the goods or services procured, excluding certain domestic taxes. The exact calculation and threshold can vary by nodal ministry and product category.

Q: Do we need to register on GeM to bid on Indian government contracts? For most central government procurement, yes. GeM has become the default channel for a large share of goods, services, and even some works procurement, so registration is typically a prerequisite rather than an optional route.

Q: Is there a minimum contract value below which these rules don't apply? Some procedural thresholds do exist, for instance around direct purchase limits and when competitive bidding or reverse auctions are triggered, but the Rule 144(xi) registration requirement and Make in India preference apply broadly across procurement types rather than being tied to a single value cutoff.

Q: How long does registration under Rule 144(xi) typically take? It requires clearance from both the Ministry of External Affairs and the Ministry of Home Affairs, and processing time varies considerably depending on the sector and the completeness of the application. Businesses in scope should budget significant lead time rather than assuming a quick turnaround.