The Indian government makes a move to shift its $400 billion public procurement to an online market platform that has already saved the administration about $1 billion so far at a time. Sellers include some of the country’s biggest companies.
India spends about 18% of the gross domestic product on procurement but only about a quarter of it can be bought on the e-marketplace, as the rest includes highly specialized items such as defense weapons and aircraft. At present, only about $3.5 billion of the annual procurement is being done through the online marketplace.
Talleen Kumar, GeM’s Chief Executive Officer estimated that the switch from legacy procurement systems could produce annual savings of about $10 billion which is enough to meet the federal government’s expenditure on health. The budget deficit is seen expanding to the most in about three decades after the government presented a fiscal package in May to stem the economic fallout of the pandemic.
The Modi government has been using the marketplace to keep Chinese companies away from government contracts after tensions between the neighbors intensified earlier this year amid border clashes.
Suppliers must note the country of origin for any goods they sell on GeM, which helps government departments implement the PM’s “Make in India” policy of self-reliance.
Till the year 2016, all Indian government procurement went through the Directorate General of Supplies and Disposals, which had its origins in the India Stores Department the British set up in 1860 to centralize merchandise purchasing for their former colony.
After looking at some of the biggest e-procurement programs, such as the U.S. General Services Administration and South Korea’s ON-line E-Procurement System, PM decided to switch to a marketplace using technology, analytics, and digitalization to make procurement more transparent and efficient.
Other countries in the Middle East and Southeast Asia are looking at a similar model, according to Boston Consulting Group Inc., which helped develop the growth road map and revenue model for India’s portal.
The government aims to take the portal to the next stage by consolidating all its procurement in one place.
