India’s 2025 reforms to procurement rules mark shift in supporting research and development (R&D). The changes ease restrictions on specialised equipment purchases and raise financial thresholds. This aims to reduce delays and improve quality in scientific procurement. The reforms reflect global trends where procurement acts as a catalyst for innovation rather than just cost control.
Recent Procurement Reforms in India
India has amended its General Financial Rules (GFR) to exempt specialised research equipment from mandatory Government e-Marketplace (GeM) use. The direct purchase limit was raised from ₹1 lakh to ₹2 lakh. Institutional heads now have authority to approve global tenders up to ₹200 crore. These changes reduce bureaucratic delays and allow faster acquisition of high-quality instruments. The reforms acknowledge that rigid procurement processes hinder innovation.
Procurement’s Role in Innovation
Procurement can stimulate private-sector R&D by creating stable demand for advanced technologies. Targeted procurement spending is linked to increased patent filings and innovation investment. However, generic procurement rules often fail to support this unless designed explicitly to spur innovation. Flexibility in procurement enables institutions to adopt cutting-edge technologies early, encouraging a virtuous innovation cycle.
Global Lessons in Innovation Procurement
Countries like Germany and the United States use procurement to shape technology markets. Germany’s High-Tech Strategy mandates innovation promotion through public procurement, supported by advisory agencies. The US Small Business Innovation Research (SBIR) programme reserves funds for startups with phased contracts to reduce risk. South Korea pays premiums for prototype technologies under pre-commercial procurement. These models focus on encouraging ecosystems rather than buying fixed products.
Challenges and Implementation Concerns
India’s reforms stop short of fully adopting market-shaping procurement. The ₹2 lakh direct purchase limit may still be low for fields like quantum computing. Global tender focus risks sidelining domestic suppliers unless local R&D is empowered. Success depends on trusting institutional leaders with procurement discretion and establishing monitoring to prevent misuse. Balancing flexibility with accountability remains crucial.
Procurement’s Historical Evolution
Procurement has evolved from record-keeping in ancient times to AI-driven strategies . Historically, it shifted from cost control to strategic resource management during world wars. Modern cognitive procurement uses AI to predict supply issues and automate compliance, speeding processes. Pfizer’s COVID-19 vaccine development is a prime example where AI-optimised procurement accelerated supplier identification drastically.
Hybrid Models and Privatisation
Privatisation of national labs is debated but not a simple solution. The US Department of Energy’s handover of Sandia National Laboratories to private management increased patent output while retaining government oversight. India’s Council of Scientific and Industrial Research (CSIR) could adopt similar hybrid models. This would combine corporate agility in procurement with public mission control and accountability.
Future Directions for India’s Procurement
Deeper reforms could include outcome-weighted tenders that evaluate qualitative factors beyond cost. Sandbox exemptions for premier institutions could enable freer procurement tied to innovation targets. AI tools like INDIAai could automate sourcing and reduce delays. Co-procurement alliances among labs might achieve economies of scale for expensive equipment. These shifts would embed procurement as a dynamic research variable.
Questions for UPSC:
- Critically discuss how public procurement can act as a catalyst for innovation. Taking examples from India and other countries, examine the challenges and benefits involved.
- Analyse the role of Artificial Intelligence in transforming procurement processes. With examples, discuss its impact on efficiency and innovation in research sectors.
- Discuss in the light of global experiences the advantages and risks of privatising national research laboratories. How can hybrid governance models balance innovation with public oversight?
- Examine the significance of outcome-weighted tenders and co-procurement alliances in enhancing research and development. How can these strategies be adapted to India’s context?
