Modi government plans Buy an Indian policy

New Delhi: To promote its flagship Make In India program, the government is proposing its own version of the US’s “Buy American” policy based on the national government’s public procurement policy, according to a government official familiar with the plan.

The policy under consideration covers purchases worth Rs 2 trillion a year, but excludes defense equipment.

Under the proposed policy, the central government will provide special preferences to companies manufacturing in India; this could take the form of easing trading and experience conditions, as well as price preferences for products and services purchased for personal use.

Purchases may include cell phones and computers, stationery and medicines, or even steel or aluminum for government and railway projects.

Once implemented, the program, which complies with World Trade Organization (WTO) norms, will encourage companies to produce in India, given the scale of government purchases.

The central government estimates that purchases could amount to around 2 trillion rupees annually. This number will increase as state governments, city governments, and government educational institutions begin to do the same.

The group of secretaries, led by Commerce Secretary Rita Teaotia, made the recommendation earlier this month and Prime Minister Narendra Modi is believed to have signed off on it. The Ministry of Commerce is currently putting the finishing touches to the policy and will notify the expenditure department of the Ministry of Finance.

“The recommendation to the Prime Minister was that the Make In India policy must be government-wide and that one of the tools (for this) is government procurement. We have a powerful tool for this, consistent with WTO rules,” added a government official who asked to remain anonymous.

Under WTO rules, if a government buys for itself rather than for commercial purposes, it can give preference to domestic products. In the Jawaharlal Nehru National Solar Mission case, which India lost to the US at the WTO, the country planned to impose mandatory local content requirements on solar developers who would sell power on a commercial basis.

The United States has a similar policy under the Buy American Act of 1933, which gives preference to U.S.-made products for government purchases.

The new e-market platform GEM (Government e-Market), which is used to transparently procure goods and services for the government, will be used to implement the new policy. “We can emphasize the preference for domestic products in government procurement and can monitor its implementation in all ministries through the GEM platform,” the official said.

Sunil Kant Munjal, CEO, Hero Corporate Service Pvt. Ltd, described the plan as “bold” and said it would help create “100 million jobs”. “This is a big boost for Make in India,” he added.

The benefits would accrue to both Indian companies and multinationals that have been operating in India for some time and have significant manufacturing facilities in the country, said Venugopal Dhoot, chairman of Videocon Industries.

“For consumer durables, production takes place mainly in Thailand and they are imported here at zero tariffs. With this move, they will be forced to produce them here for supply to the government. The Modi government appears to be sticking to its goal of promoting local industries,” he added.

Amrit Raj contributed to this story.