[Answered] India’s procurement reforms can unlock innovation. Examine how blending these changes with global best practices in market-shaping and hybrid governance can transform the national R&D ecosystem.

Introduction

India spends only 0.65% of GDP on R&D (UNESCO, 2023), far below global peers. Recent procurement reforms in GFR 2025 can shift procurement from cost-control to innovation-catalyst, driving India’s R&D transformation.

Procurement as a Lever for Innovation

1. Public procurement forms 20-30% of GDP in many economies (World Bank) and can stimulate private R&D investment through stable demand.
2. India’s earlier procurement rules, mandating GeM purchases up to ₹200 crore, often hindered innovation due to delays, poor vendor quality, and rigid compliance.

India’s Recent Procurement Reforms

1. Flexibility for Research Needs: Exemption from GeM portal for specialised R&D equipment. Direct purchase threshold raised from ₹1 lakh to ₹2 lakh.
2. Decentralised Authority: Institutional heads empowered to approve global tenders up to ₹200 crore, reducing bureaucratic lag.
3. Balance of Autonomy and Accountability: While discretion increases, safeguards like purchase committees remain to check misuse.

Impact: These changes align with the concept of “catalytic procurement”, where procurement acts as an early adopter and stimulant of advanced technologies.

Global Best Practices to Blend With

1. Mission-Oriented Procurement (Germany): Through its High-Tech Strategy, Germany uses procurement to drive innovation. Supported by KOINNO, advising procurers and connecting suppliers. India could adopt dedicated procurement innovation cells in CSIR and IITs.
2. SBIR Model (United States):  3% of federal R&D funds reserved for startups under Small Business Innovation Research (SBIR). Provides phased contracts to derisk technologies. India could earmark procurement-linked innovation funding for startups in biotech, AI, and clean tech.
3. Pre-Commercial Procurement (South Korea & EU): Pays premium prices for prototype technologies meeting moonshot goals. EU’s Joint Procurement Agreement enables pooling demand for costly research equipment. India’s labs could adopt co-procurement alliances for cryogenic coolers, quantum devices, etc.
4. Hybrid Governance (USA’s Sandia Labs Model): U.S. Department of Energy privatised Sandia’s management but retained mission control through performance-based contracts. Resulted in increased patents and SME linkages. India’s CSIR could experiment with public-private management models in select labs.

The Way Forward for India

1. Outcome-Weighted Tenders – Evaluate bids on innovation, scalability, and R&D investment, not just cost.
2. Sandbox Exemptions – Allow top labs to bypass GFR for part of their procurement with third-party audits.
3. Cognitive Procurement – Deploy AI-driven tools for predictive sourcing and risk assessment under INDIAai.
4. Innovation Scorecards – Integrate procurement with National R&D Roadmaps, ensuring alignment with strategic sectors like quantum, semiconductors, and green hydrogen.

Conclusion

A purposeful state action can shape markets. India’s procurement reforms, blended with global best practices, can transform procurement into the engine of national innovation.