Procurement policies, often designed with transparency and cost-efficiency in mind, have long had unintended consequences for research and development. While preventing fraud, these frameworks frequently kill innovation, one process at a time, by prioritising procedural compliance over scientific needs. India's recent reforms to its General Financial Rules (GFR) -- particularly exemptions from the Government e-Marketplace (GeM) portal and enhanced financial thresholds for research and development (R&D) procurement -- are a welcome change.

Procurement as innovation catalyst

The tug-of-war between procurement policies and innovation is not new. Studies have shown that public procurement, when done properly, can give a push to private-sector R&D by creating stable demand for advanced technologies. Moreover, it has been found that targeted procurement spending is associated with increased patent filings and private R&D investment, forming a virtuous cycle of innovation. However, as the Brazilian case study in EconStor's 2023 report notes, generic procurement rules rarely achieve this unless explicitly designed to spur innovation. India's pre-reform framework fell into this trap: mandating GeM purchases for all sub-₹200 crore equipment, regardless of specialisation, which forced scientists into a time-consuming exemption process for globally benchmarked tools. Vendors on GeM often supplied materials of poor quality, compromising research.

The Government of India's policy changes in June 2025 directly address these issues. By allowing institutional heads to bypass GeM for specialised equipment and raising direct purchase limits from ₹1 lakh to ₹2 lakh, the reforms acknowledge that cookie-cutter procurement is incompatible with R&D's bespoke needs. Delegating approval for global tenders up to ₹200 crore to vice-chancellors and directors eliminates bureaucratic lag -- a chronic grievance highlighted by the Prime Minister's Economic Advisory Council. These adjustments align with theories of "catalytic procurement", where flexibility enables public institutions to act as early adopters of advanced technologies, stimulating private-sector innovation.

Yet, the reforms stop short of a full paradigm shift. While empowering institutional leaders, they retain safeguards such as departmental purchase committees for higher-value acquisitions. This could be argued as a necessary balance. However, even the revised ₹2 lakh direct purchase limit could remain inadequate for high-cost fields such as quantum computing or biotechnology. Additionally, the focus on global tenders, while ensuring quality, could marginalise domestic suppliers unless local R&D systems are empowered and left free to collaborate globally, and compete at that level.

The policy's success will depend to a large extent on implementation. Trusting institutional heads with procurement discretion assumes high ethical standards, which is something that will have to be built up, slowly, in a system that has been historically plagued by inefficiency. As the policy rolls out, monitoring mechanisms will be vital to prevent misuse while preserving agility.

How has procurement evolved globally? Globally, nations leading in R&D outcomes have already reimagined procurement as something that acts as a catalyst for innovation -- not just a cost-control mechanism. India can learn from their experiences. Procurement processes have evolved from ancient record-keeping to Artificial Intelligence (AI)-driven strategies. India would do well to learn from these.

Germany's approach is a good example of balancing procurement checks and R&D ambitions. Through its High-Tech Strategy, the federal government mandates that public procurement be used to promote innovative solutions, supported by KOINNO, which is a dedicated agency advising procurers, curating supplier databases, and hosting cross-sector innovation forums. This institutionalises what economist Mariana Mazzucato terms "mission-oriented procurement", where state-purchasing power deliberately shapes technological markets. Similarly, the 'Small Business Innovation Research (SBIR) program' of the United States reserves 3% of federal R&D funds for startups, using phased procurement contracts to derisk early-stage technologies while maintaining competitive tension among vendors. These models recognise that procuring innovation is not about buying predefined products but in fostering ecosystems where suppliers compete on breakthroughs.

India's GeM reforms partially embrace this philosophy by exempting specialised research equipment from mandatory portal use -- a nod to the fact that Indian labs often face delays extending to a few months when dealing with niche instruments. However, the policy lacks Germany's proactive market-shaping elements or the SBIR's staged funding structure. For instance, India's ₹200 crore global tender limit for institutional heads still prioritises cost benchmarks over technical ambition, unlike South Korea's "pre-commercial procurement" system that pays premium prices for prototypes meeting moonshot criteria.

Procurement's evolutionary arc

Procurement's 5,000-year journey, from Egyptian scribes tracking pyramid materials to AI predicting supply chain details, reflects an evolution from control to creativity. The Industrial Revolution looked at procurement as a cost-centric function, but the two World Wars exposed its strategic role in securing scarce resources.

Post-1945, this duality deepened: corporations adopted Just-In-Time inventory systems while governments used procurement to spur sectors such as semiconductors (via National Aeronautics and Space Administration contracts) and renewables (through the European Union's green mandates).

Today's frontier is "cognitive procurement", where tools such as generative AI analyse supplier ecosystems, simulate scarcity scenarios, and automate compliance -- freeing researchers to focus on creative sourcing. Consider Pfizer's COVID-19 vaccine effort, where AI-optimised procurement identified multiple critical suppliers within a few hours, compressing a months-long process into weeks.

The discussion over procurement policies often leads to calls for privatisation of national labs, as that would probably open up the procurement process. However, it would be wise to consider that the debate over privatising India's national labs hinges on a false binary. As the U.S. experience shows, privatisation is not about abandoning public oversight but redefining it. When the Department of Energy handed over the management and operation of Sandia National Laboratories in 1993 to a private company, it retained mission control through performance-based contracts while unlocking private capital for laser and materials research. The result? A huge increase in patent filings and partnerships with a number of small and medium enterprises within a decade.

India's Council of Scientific and Industrial Research (CSIR) could adopt this hybrid model. Laboratories working in strategic fields such as space tech or quantum computing might benefit from corporate-style agility in procurement and hiring, provided the government maintains some control to safeguard national interests. However, success requires robust accountability frameworks and some alignment with innovation road maps.

Procurement as a research variable

India's procurement reforms are necessary but insufficient. Four systemic shifts could anchor deeper change. The first would be outcome-weighted tenders. Following Finland's example, there must be an evaluation of bids not just on cost but also on an index that weighs various qualitative factors such as supplier R&D investment and scalability potential.

The second would be providing sandbox exemptions. Allow institutions such as the Tata Institute of Fundamental Research or the Indian Institutes of Technology to bypass GFR entirely for some percentage of their purchases, provided they meet annual innovation targets audited by third parties.

The third intervention should be AI-augmented sourcing. Deploy the INDIAai ecosystem to create a procurement assistant that scans global catalogues, predicts customs delays, and suggests alternative materials -- reducing decision cycles from months to hours.

And finally, go in for co-procurement alliances. Replicate the European Union's Joint Procurement Agreement, enabling multiple Indian labs to aggregate demand for high-cost items such as cryogenic coolers, achieving economies of scale.

Privatisation is not a silver bullet but a tool among many. As this study on U.S. labs warns, merely transferring ownership sans performance-linked funding or competitive pressure risks creating ineffective labs. The goal must be creating a procurement continuum where public and private entities coexist -- each accessing shared innovation marketplaces but governed by distinct risk-reward matrices.

India's GeM reforms are a tentative step toward procurement systems that value time-to-lab as much as cost savings. By marrying these changes with global best practices in market-shaping, cognitive tools, and hybrid governance, the nation could transform procurement from a research impediment to its accelerant. The lesson from history is clear: civilisations that procured for monuments left ruins; those that procured for inquiry built futures.

Arindam Goswami is a Research Analyst in the High-Tech Geopolitics Programme at The Takshashila Institution, Bengaluru

Unlocking innovation with India's procurement reforms