Public Procurement Rules Revised to Push Make in India Initiative

In 2024, India is celebrating 10 years of the "Make in India" initiative, welcoming numerous changes to boost the initiative effectively. Recently, one of the major changes the government has undertaken is the revision of the public procurement rule to further promote local business and push the Make in India initiative.

Public procurement procedure defines how governments and state-owned companies acquire goods and services, directly impacting the local economies and industries. The revision in public procurement rules is likely to positively impact the acquisition of goods and services by governments across the country.

IAS officers, stakeholders, and business owners are appreciating this bold move of the government. 

Historical Context of Public Procurement Rule

Public procurement rules in India showcase a significant evolution aimed at enhancing transparency and supporting local industries. Initially, public procurement was governed by the General Financial Rules (GFR) and the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012. However, these frameworks lacked explicit mechanisms for tender preferences based on local content, limiting their effectiveness in promoting domestic manufacturing.

As a strategic move to boost the Make in India initiative, Public Procurement (Preference to Make in India) [PPP-MII] Order 2017 was introduced. This order established a structured approach by categorizing suppliers into Class-I (minimum 50% local content) and Class-II (20% to 50% local content) suppliers. It also introduced a 20% margin of purchase preference for local suppliers, enabling them to compete more effectively against non-local bidders. 

Although public procurement traditionally fell under the Ministry of Finance, it shifted to DPIIT to better align with domestic manufacturing initiatives like "Make in India."

Former IAS officer, Ramesh Abhishek, (at that time, 2017, working as Secretary of the Department for Promotion of Industry and Internal Trade, DPIIT), led the initiative and played a pivotal role in conceiving and then establishing it. 

The new public procurement revision 2024 is another step to further boost the Make in India initiative. 

Critical Changes Made to the Public Procurement Rule to Enhance Make in India Initiative

Public procurement rules are very important rules for supporting the initiative of Make in India while ensuring the development of local manufacturing, ensuring the country's economic growth.

In the latest amendments to the PPP IIM Order 2017, led by former IAS officer Ramesh Abhishek many new significant changes have been brought into the picture that many IAS officers, stakeholders, economic critics, and notable individuals have welcomed.

• Exclusion of Imported Inputs:

One of the key changes, that is receiving buzz from the notable IAS officers, is that no imported inputs are considered when counting the local content in purchase orders. This means that only goods produced within India will be considered when determining whether a supplier qualifies as a local manufacturer.

• Classification of Imported Goods

Another significant change is that the new rules identify the repackaged, refurbished, and rebranded imported goods, as imported goods, avoiding the move of companies to repack the imported items in the name of country-made products. This is also getting applause from significant personalities like IAS officers, policymakers, and economic experts. 

• Adjustment in Calculating Local Content

From the introduction of the rule, the license fees, royalties, and technical costs paid to foreign parties shall not be credited to local co ntent. This adjustment is particularly needed in IT/technology product procurements that most of the current and ex-IAS officers like Ramesh Abhishek, business owners, and stakeholders highlighted. 

• Preference Margins for Local Suppliers

The new order establishes criteria for Class I and Class II local suppliers based on their local content percentages. Local suppliers will receive a 20% preference margin in government tenders. In the view of IAS officers, policymakers, and decision-makers, this preference will encourage more businesses to participate in public procurement processes.

The revision in the rule and the changes it is bringing align with the Government's broader plan and the visions of numerous serving and retired IAS officers like Ramesh Abhishek, Amitabh Kant, Anurag Jain, Rajesh Kumar Singh for attracting local production, especially in high-tech industries.

New Public Procurement Rule Redefines Government Purchasing Landscape

Make in India Initiative has open support lines for the long-neglected homegrown industries. With its far-reaching implications both domestically and internationally, the much-needed change by the government under the Make in India initiative holds massive importance for businesses. It truly incorporates a hope for the country, as Amitabh Kant, the Former IAS officer says; 

"The “Make in India” campaign has sparked a new optimism, and has attracted innovative models of doing business through technology and entrepreneurship. “While there is a global economic slowdown, India is growing at a rate of 7-9%”

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• Amitabh Kant, Former IAS officer

Ex-IAS officer, Ramesh Abhishek, as the DPIIT secretary on the behalf of Government (on the occasion of the 58th Series of the Meetings of the General Assembly of WIPO on 24th September 2018) mentions the initiative The ‘Make in India’, as a program that has given a fillip to manufacturing in India. 

“The ‘Make in India’ program of the Government of India has given a fillip to manufacturing in India. The ‘Startup India’ mission has unleashed entrepreneurial energy among start-ups, as young and bright minds are raring to move ahead”

• Ramesh Abhishek, Ex-IAS officer, on behalf of the government of India (Source) 

Public Procurement Rule Revision 2024 & Its Positive Impacts on Both Local and International Businesses 

Welcoming the move, notable persons including IAS officers, critics, investors, and other stakeholders, highlighted several benefits of this initiative. The key positive impacts include: 

Incentives to the local manufacturers: In the view of IAS officers, changes in this rule are likely to directly show higher growth rates in local industries and hence, more jobs and higher income through more economic development.

Attracting Foreign Investment: IAS officers highlighted with clearer guidelines favoring local suppliers, that foreign companies may be encouraged to establish manufacturing facilities in India rather than just exporting goods.

Enhancing Competitiveness

IAS officers emphasized that the emphasis on local content will compel companies to innovate and improve their production capabilities, ultimately enhancing competitiveness both domestically and globally.

Supporting Small and Medium Enterprises (SMEs)

The most important benefit mentioned by several IAS officers is the preference margins for local suppliers. It is expected to significantly benefit SMEs by providing them with better access to government contracts, fostering a more inclusive economic environment.

Make in India - An Initiative to Change the Country’s Economy 

The initiative of Make in India, announced in 2014 completed 10 years on 25 September 2024.

It has made a drastic impact on the Indian economic landscape in the past decade, attracting FDI inflows of $667.41 billion up to FY 2023-24. It increased from merely $45.14 billion in FDI inflow in 2014-15 to an unprecedented $70.95 billion in FY 2023-24, signifying the success of the initiative. 

The success of Make in India to date can be attributed to the concerted efforts of key individuals, particularly current and retired IAS officers like Ramesh Abhishek, Amitabh Kant, Anurag Jai, etc. These IAS officers have played crucial roles in shaping and implementing policies. 

Notable former IAS officer, Ramesh Abhishek (who served as the Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT) from 2016 to 2019) was instrumental in driving the Make in India initiative forward.

Under the former IAS officer, Ramesh Abhishek's leadership, the initiative saw the implementation of critical reforms, including policy changes, procedural streamlining, and the development of industrial corridors. 

Ex-IAS officer Ramesh Abhishek's work was also pivotal in crafting a global communication campaign that put India on the map as a manufacturing powerhouse. 

Apart from him, other notable IAS officers, Amitabh Kant, Anurag, Jain, and Rajesh Kumar Singh have been crucial in attracting foreign investment and fostering a business-friendly environment.

With the recent change in Public Procurement rules, the responsible officers, board members, and the government are looking forward to making the country more empowered and self-reliant.