Introduction: From Policy Vision to Market Reality
The Make in India initiative has transformed from its inception in 2014 from an initiative aimed at increasing the level of manufacturing in the country to a well-established process through which government purchases of goods and services will assist domestic businesses. The use of purchasing power (which the government estimates will be 20-22% of the total GDP) creates a continuous demand stream for Indian manufacturers; as this increase continues to grow, it will necessarily alter both the vendors that compete for contracts and how vendors are awarded contracts.
Policy Framework: The Backbone of Domestic Preference
The Public Procurement (Preference to Make in India) Order 2017 from the Department for Promotion of Industry and Internal Trade is the backbone of this transformation. Suppliers are classified by local content as a Class I, Class II, or non-local supplier. Class I suppliers will get the highest preference and can win contracts up to 20% higher than their foreign competitors if they have more than 50% domestic value addition.
Restrictions on global tenders below ₹200 crore (for all suppliers) and the reservation of smaller contracts to domestic suppliers have drastically decreased global competition in many procurement categories. This change has made public procurement a policy-driven marketplace instead of just being a price-based marketplace.
2024 Amendment: Strengthening Enforcement
A key development came with the July 2024 amendment, which addressed misuse of the policy. Earlier, firms could import goods, make minor modifications, and still qualify as domestic suppliers. The updated rules now exclude reseller margins from local content calculations and require OEM country-of-origin certification. This shift ensures that the benefits of Make in India flow to genuine manufacturers rather than intermediaries, strengthening the credibility of the framework.
Impact on Tender Participation
The "Make in India" initiative has changed how businesses can participate in certain kinds of tenders. In many cases, only domestic suppliers can submit bids on tenders, when there is enough local capacity to satisfy all demand. Even on open tenders, Indian manufacturers benefit by having a 20% price preference over less expensive imports, so they can effectively compete against imported goods. One of the mechanisms that helps promote local suppliers is through "quantity splitting", where a certain portion of contracts goes to local bidders, even if they are not the lowest priced bid. Due to the many tenders that were previously open to global competition now being awarded solely to local suppliers, thousands of companies are now developing new production facilities in India.
Digital Enablement: The Role of GeM
The Government e-Marketplace has been pivotal in providing additional ways for business to access Government procurement opportunities. In FY2024-25, the Gross Merchandise Value for GeMs is ₹13.43 trillion and has provided significant digitization of procurement to enable ease of participation for Micro, Small and Medium Enterprises (MSMEs) and start-up businesses.
GeM has also provided reduced barriers to entry for domestic suppliers to compete with other suppliers for Government procurement packages through reduced paperwork, increased transparency in relation to Government procurement processes, and integration of Artificial Intelligence based tools. As a result, GeM has played an important role in providing access to the procurement process for many domestic suppliers who may not have been able to participate prior to the implementation of GeM.
Sectoral Impact: Gains and Gaps
The impact of 'Make in India' has been inconsistent across sectors. The defence sector has undergone substantial change due to initiatives taken by the Ministry of Defence, with a forecasted export of ₹23,622 crores (INR) in the financial year 2024-25 and strong efforts to increase the level of domestic production of defence equipment. The pharmaceutical sector has demonstrated its success by experiencing a shift from importing pharmaceuticals to having a surplus of pharmaceuticals exported because of the increased use of domestically manufactured pharmaceuticals as compared to previously relying on imported pharmaceuticals.
The increase in domestically manufactured renewable energy products (solar and wind) has increased quite a bit after the imposition of import tariffs created a temporary increase in the price of renewable energy products. At the same time, the IT and software sectors are particularly complex in developing and determining local content because service-based industries tend to make it difficult to determine and validate local content.
Success Story: Defence and GeM
India has made impressive accomplishments in defence procurement through their defence producer ecosystem supported through policy promoting the manufacture of defence products and parts in India as well as government contracting preference for producing parts domestically which has instantiate capability to export defence equipment as an industry.
GeM has also resulted in impacting the capacity of government contracting programs available to support small businesses and MSME participation in government contracting; thus, these two major accomplishments support and reflect the success of "Make in India" as not merely a promotional campaign but rather an active procurement system yielding large-scale market access for local businesses across the country.
PLI and Procurement: A Combined Growth Engine
The Production Linked Incentive Scheme will encourage manufacturers to invest in the production base of India by subsidizing them for producing goods in India. The PLI will incentivize companies to access capital through either the PLI scheme or via obtaining procurement/purchasing privileges through Make in India.
Together, the two schemes will generate productive manufacturing investment of ₹17,600 billion and help establish an industrial infrastructure that will drive industrial growth across multiple important sectors, including electronics, pharmaceutical products, and renewable energy.
MSME Participation: Opportunity with Constraints
The Make in India programme has allowed MSMEs to explore many opportunities and has also enabled government purchases to happen via the GeM (Government e-Marketplace) and government entities, with a national procurement target of 25%. As a result of this, smaller enterprises are now able to have more visibility and access to participate in government procurements.
However, there are still several challenges that these small enterprises face when trying to compete for government tenders on a larger scale, including late payment, compliance requirements, and limited capacity to produce large volumes. Additionally, while they can now have much greater access, growing their business (scale) remains one of the key barriers to being able to continue to participate.
Key Challenges: Balancing Policy and Performance
The policy framework has significant trade-offs despite its impacts. A major concern is balancing domestic preference and quality assurance. If too much of a priority is placed on local suppliers and inadequate quality controls are in place, it can result in inefficiencies and substandard results.
Cost is another contributing factor; Government agencies could be paying higher amounts in the short term to support domestic industry. Other compliance issues exist, such as false claims of local content, and require stronger measures to enforce. Finally, global trade pressures can also complicate things as India tries to balance domestic priorities with internationally agreed commitments.
Conclusion: A Structural Shift in Procurement
Through the Make in India initiative, the tendering process has undergone a significant change by harmonising public procurement and national industrial objectives, thus broadening the scope for domestic producers, driving inclusion for MSME's (micro, small and medium enterprises) and reducing reliance on imports in certain priority sectors.
For the long-term success of the Make in India framework, strong verification systems, quality standards, and a gradual transition to increased global competitiveness must continue to be maintained. Ultimately, this means that the measure of success will not only be that there is an increase in participation within the tendering process, but also if manufacturers in India can compete and win outside of the price protection of the domestic market.
