Unlocking Innovation with India’s Procurement Reforms

• Procurement policies often prioritize procedural compliance over scientific needs, hindering innovation.

• India’s recent reforms to its General Financial Rules (GFR) are a welcome change, including exemptions from the Government e-Marketplace (GeM) portal and enhanced financial thresholds for R&D procurement.

• Public procurement can stimulate private-sector R&D by creating stable demand for advanced technologies.

• The pre-reform framework in India was criticized for mandating GeM purchases for all sub-₹200 crore equipment, leading to poor quality materials and compromising research.

• The Government of India’s policy changes in June 2025 address these issues, allowing institutional heads to bypass GeM for specialized equipment and raising direct purchase limits.

• The policy aligns with theories of “catalytic procurement,” enabling public institutions to act as early adopters of advanced technologies, stimulating private-sector innovation.

• However, the reforms do not fully shift the paradigm, with safeguards for higher-value acquisitions and potential marginalization of domestic suppliers.

• The policy’s success depends on implementation, with monitoring mechanisms vital to prevent misuse while preserving agility.

Global Procurement Evolution and Implications for India

Procurement as a Catalyst for Innovation

• Procurement processes have evolved from record-keeping to AI-driven strategies.

• Germany’s High-Tech Strategy mandates public procurement to promote innovative solutions.

• The US’s ‘Small Business Innovation Research (SBIR) program’ reserves 3% of federal R&D funds for startups.

• These models recognize procuring innovation as fostering ecosystems where suppliers compete on breakthroughs.

Procurement’s Evolutionary Arc

• Procurement has evolved from control to creativity over 5,000 years.

• Post-1945, corporations adopted Just-In-Time inventory systems, while governments used procurement to spur sectors like semiconductors and renewables.

• Today’s frontier is “cognitive procurement,” where tools like generative AI analyze supplier ecosystems, simulate scarcity scenarios, and automate compliance.

Privatisation of National Labs

• The debate over privatising national labs hinges on a false binary.

• Privatisation is about redefining public oversight, not abandoning it.

• The Department of Energy handed over the management and operation of Sandia National Laboratories in 1993 to a private company, resulting in a huge increase in patent filings and partnerships.

Procurement as a Research Variable

• India’s procurement reforms are necessary but insufficient.

• Four systemic shifts could anchor deeper change: outcome-weighted tenders, sandbox exemptions, AI-augmented sourcing, and co-procurement alliances.

Government Procurement Innovation is important topic for Civil service exam (WBCS).

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