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Indian government's version of Amazon.com helps it save US$1 billion

Press Information Bureau:  September 21, 2020

The Government e-Marketplace is used after tensions between neighbours escalated earlier this year amid border disputes to keep Chinese businesses away from government contracts. Suppliers must mention the country of origin for any products that they sell on GeM, which helps departments enforce the "Make in India" policy of Modi govt.

According to a government official, the decision by the Indian government to transfer a portion of its

US$400 billion public procurement to an online market platform has already saved the administration around US$1 billion so far at a time when it is trying to rein in its fiscal deficit.

The four-year - old Government e-Marketplace or GeM, also referred to as the government's Amazon.com, allows ministries and state companies link with sellers around the country to purchase computers, vehicles, chairs and millions of other goods and services at the lowest possible price. Sellers include some of the biggest companies in the world, including Hindustan Unilever Ltd. (HUL), Maruti Suzuki India Ltd. and Tata Motors Ltd.

Mr Talleen Kumar, GeM’s chief executive officer, said in an interview that if GeM can bring about savings in procurement, that money can be utilized by the government for other important purposes and priorities.

India spends about 18% of the gross domestic product on procurement, but only about a quarter can be bought on the e-marketplace, as the remainder comprises highly specialised products such as defence arms and aircraft. Currently, via the online marketplace, only around US$3.5 billion in annual procurement is being performed, but Kumar believes it will cross US$100 billion in three to five years. He projected the transition from legacy procurement programmes will yield around US$10 billion in annual savings — enough to cover the federal government's health spending.

At a time when his government is attempting to rationalise its spending, the savings are a blessing to PM Narendra Modi. The budget deficit is seen to expand most in about three decades after a fiscal package was proposed in May by the government to curb the pandemic's economic effects. Mr Modi is also using the marketplace to keep Chinese businesses away from government contracts after community tensions escalated earlier this year amid border conflicts. For any products they sell on GeM, suppliers must mention the country of origin, which helps government departments enforce Modi's "Make in India" self-reliance strategy, Kumar said.

Until 2016, all Indian government procurement was routed through the Directorate General of Supplies and Disposals, which originated in the India Stores Department that the British founded in 1860 to centralise the purchasing of goods for their former colony. Having looked at some of the largest e-procurement programmes, including the U.S. General Services Administration and the On-line e-procurement system in South Korea, Mr Modi has agreed to move to a marketplace using technology, analytics and digitization to make procurement more transparent and effective. 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.

Mr. Kumar said that by consolidating all its procurement in one place, the government aims to take the portal to the next level.Even if there is not a category, vendors can still bid on GeM and can be added to the category later, this would lead to economies of scale, greater exploration of prices and the distribution of best practises.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.