Procurement and Innovation: From Control to Catalyst
Introduction
Procurement is often viewed as a cost-control and anti-fraud mechanism. However, in the field of Research and Development (R&D), rigid procurement rules can stifle innovation. India’s recent reforms to the General Financial Rules (GFR), June 2025—including exemptions from the Government e-Marketplace (GeM) and higher financial thresholds for research procurement—signal a shift towards aligning procurement with scientific needs.
Why Procurement Matters for Innovation
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Catalyst role: Well-designed procurement policies can create stable demand for advanced technologies, encouraging private-sector R&D and patents (Brazilian EconStor Report, 2023).
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Virtuous cycle: Targeted procurement leads to new patents → private investment → further innovation.
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Problem in India: Earlier rules forced scientists to buy even niche equipment via GeM, causing delays and compromising research quality.
India’s Recent Reforms (2025)
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Exemptions from GeM for specialised equipment.
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Direct purchase limit doubled (₹1 lakh → ₹2 lakh).
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Global tender authority up to ₹200 crore delegated to VCs/directors.
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Institutional autonomy in procurement decisions.
👉 These steps reflect the theory of “catalytic procurement” — enabling public institutions to act as early adopters of advanced technologies.
Global Best Practices
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Germany: High-Tech Strategy + KOINNO → public procurement deliberately promotes innovative solutions (mission-oriented procurement, Mariana Mazzucato).
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USA: Small Business Innovation Research (SBIR) → reserves 3% federal R&D budget for startups, de-risking early-stage innovations.
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South Korea: Pre-commercial procurement → premium prices for prototypes meeting moonshot criteria.
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EU: Joint Procurement Agreement → collective purchasing for high-cost equipment.
👉 Lesson: Leading economies use procurement not as a routine purchase system, but as a market-shaping instrument.
Procurement Evolution (Global Context)
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Ancient times: Record-keeping (Egyptian pyramids).
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Industrial era: Cost-centric approach.
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WWs: Procurement as strategic resource mobiliser.
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Post-1945: NASA & EU used procurement to develop semiconductors, renewables.
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Today: Cognitive procurement using AI to predict supply chains, optimise sourcing (e.g., Pfizer’s COVID-19 vaccine).
Challenges in India’s Reforms
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₹2 lakh direct purchase cap still inadequate for expensive R&D (quantum, biotech).
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Risk of over-dependence on global tenders, marginalising domestic suppliers.
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Success depends on ethical standards of institutional heads and effective monitoring.
The Way Forward
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Outcome-weighted tenders – Evaluate bids on innovation, scalability, and supplier R&D, not just cost. (Example: Finland).
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Sandbox exemptions – Select institutions (IITs, TIFR) exempted from GFR for a share of procurement, audited against innovation outcomes.
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AI-augmented sourcing – INDIAai ecosystem to predict delays, suggest alternatives, and accelerate procurement cycles.
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Co-procurement alliances – Pool demand across labs for high-cost equipment (like EU’s joint procurement).
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Hybrid governance models – Inspired by U.S. labs (e.g., Sandia National Lab, 1993), combine corporate agility with public accountability.
Conclusion
Procurement policies are no longer mere financial rules but research variables. India’s 2025 reforms are a tentative first step toward balancing transparency and innovation. By adopting global best practices, leveraging AI, and allowing hybrid governance, procurement can transform from a bottleneck into a driver of discovery.
👉 Civilisations that procured for monuments left ruins; those that procured for inquiry built futures.
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