India First: The new mantra for government purchases

NEW DELHI: It's India First for the government and it means potentially a $600 billion-plus ‘market’ for Indian manufacturing and services companies.

The Centre’s recast of its General Financial Rules (GFR) that guide public finance including government procurement, and created an enabling provision that gives first preference for “locally manufactured goods or locally produced services”.

The reworked GFR was announced in March 7, 2017.

Government procurement in India is around 30% of GDP, which currently is around $2.1 trillion. That means $600 billion-plus worth of goods and services bought by government departments will now be guided by the amended Rule 153 of GFR 2017.

The rule — ‘Reserved Items and other Purchase/Price Preference Policy’ — reads: “The Central Government may, by notification, provide for mandatory procurement of any goods or services from any category of bidders, or provide for preference to bidders on the grounds of promotion of locally manufactured goods or locally provided services”.

Senior officials familiar with the matter, speaking off the record, told ET the rule will mean that any government department can bring in a national procurement policy for a good or service mandating that this be procured preferably indigenously. These officials also said the finance ministry will issue detailed guidelines and manuals on procurements soon.

Some departments have shown local preferences in purchase orders. But the explicit backing in GFR, officials said, will greatly add to the acceleration of local procurement because GFR sets the guidelines for public finances.

Many countries have laws that explicitly ask for local preference in government procurement, like the Buy American law in the United States. Swadeshi Jagran Manch (SJM), the economic wing of Rashtriya Swayamsevak Sangh, has also been pitching for a similar law in India. While there is no such legislation in the works yet, Rule 153 of GFR will now help provide a very strong incentive for India First in government’s thousands of crores worth purchases.

Ashwani Mahajan, national convenor of SJM told ET : “We welcome the government move on this and we and hope that different departments including at state government level will act fast on this-…to promote local industry.”