Image 1 credit- wladimir1804 – stock.adobe.com

The history of human and economic evolution shows a dramatic trend in innovation and technology, starting from discovery of wheel, innovation of fire, from hunting to agriculture, trade via sea route, first industrial revolution powered by steam engines, the second by electricity and mass production, third driven by computers and automation, fourth evolution by Internet of Things (IOT) and Artificial Intelligence (AI) . Even if we look at India or any developing countries it took decade for government to reach to masses overcoming discrimination based on caste, race, religion, gender, rural/urban divide, be it electricity, water connection to remote parts but The new era of Artificial Intelligence (AI) represents a leap forward, Artificial Intelligence (AI) with help of internet breached all barriers and empowered masses without any discrimination. In other words, it is democratizing knowledge, resources to the masses and bridging the gap in an unjust society across the globe. with near-zero and marginal cost (free and paid services). This innovation, without political bias or discrimination, has the potential to remove prevailing inefficiencies in the system. Making the system increasingly transparent across financial transactions, which will bring equitable and efficient reform faster than any prior industrial revolution across public and private work. 

The World Bank defines Public Procurement as “The process of purchasing goods, services or works by the public sector from the private sector.” The money the government spends isn’t just a budget allocation but an engine for growth of the economy i.e. strategic economic tool; it triggers private long-term investment in the economy. Official estimates, including those from the World Bank and a study of the India’s budget from 2014 to 2025, highlight that public procurement in India is around 20 to 22 % of GDP. This translates to Rs. 66 Lakh Crore (Nominal GDP estimate of ₹330.68 Lakh Crore for FY 2024-25). A rough estimate, as per data from World Population Review (WPR) , highlights that approximately 140 countries in the world have a lower budget compared to India’s public procurement. This data highlights mammoth spending by the Government of India and the importance of managing it efficiently.

In the past, the Government of India (GoI) brought various initiatives to increase the efficiency and bring the highest standards of integrity and transparency in public procurement, like –

I. Government e-Marketplace (GeM) – This portal was launched in 2016. It is an online marketplace for common-use goods and services by various government departments/ ministries etc. It brought much-needed Reverse Auction and Direct Purchase features, which reduced the cost of procurement (World Bank reports median savings around 9.75%) and faster procurement cycles by eliminating tender processes for repetitive nature standard items. GeM is a mandatory platform for Central Ministries/Departments. GeM Gross Merchandise Value (GMV) for FY 2022-23 was 2 lakh Crore, for FY 2023-24 was 4 Lakh Crore, FY 2024-25 was around 5.42 Lakh Crore highlights rapid growth of the platform.

II. Central Public Procurement Portal (CPPP) – It was developed by the National Informatics Centre (NIC), GOI has made it mandatory single-point access platform for all Central Government Ministries, Departments, Public Sector Enterprises (CPSEs), and Autonomous Bodies to manage their high-value tenders. primary function of it is e-Publishing, Tender inquiry, corrigendum, and contract award details.

1. Present use of AI in Public Procurement –

i. Fraud detection and anomaly detection-

With the help of past tender/purchase data, the machine learning model analyses and generates a normal baseline; any deviation from it, like suspicious bidding rotations, price clustering, or abnormal contract changes, is immediately flagged. Example- In India, the Government e-Marketplace (GeM) utilizes AI to sort and clean supplier data, making price comparisons and compliance checks instant. Another example is Mexico’s “hyper-forest” predictive model using AI/ML to instantly identify corrupt contracting practices and conflicts of interest in public procurement.

ii. Document Processing with the help of AI/ML –

Natural Language Processing (NLP)and Optical Character Recognition (OCR) extract and verify important terms as requested by users from lengthy tender documents and contracts. It has resulted in checking compliance automatically, identifying missing documentation, and ensuring consistency across submissions, which helps in reducing the time required for technical evaluation

iii. Automated Spend Analysis and Optimization –

Before Microsoft Excel, accounting was a difficult job; now, in the era of AI, studying financial data like invoices, purchase reports/orders has become much simpler. The department can categorize and track economic data; it can easily help in identifying off-contract purchases for user departments. Even an accountant can use Microsoft Excel without knowledge of Power BI/ analytics and can generate patterns and develop dashboards highlighting spend patterns. AI has bridged the gap of interacting with computers without knowledge of machine language; now, with the help of a prompt and using human language, the desired output can be achieved.

iv. Generative AI for Assistance (GenAI)

There was a time for doubts or help, we used to have a telephone operator, then it got replaced by an email form, and now Generative AI acts as a virtual guide/chatbot, such as GeMAI on the GeM portal. which helps in solving routine queries, understanding complex regulations, and providing guidance to queries of buyers and sellers. It has reduced the workload, complaints faced by the helpdesk team.

2. Future Potential for AI in Public Procurement –

AI is categorized in three stages- the first is Artificial Narrow Intelligence (ANI) the category is the AI model that we are using at present; the second one is Artificial General Intelligence (AGI), which will be Strong AI. at present it is at conceptual stage, this model can understand, learn, and apply its intelligence to solve any problem a human can solve. It would possess common sense, reasoning, and generalization abilities. The third stage is Artificial Superintelligence (ASI), which is Super AI that will surpass human intelligence virtually in all domains, social interactions/skill set, wisdom etc., even at Artificial Narrow Intelligence (ANI) AI is revolutionary in nature in the coming decade with advancement AI to Artificial Superintelligence (ASI) it will completely transform public procurement along with all sectors.

Image 2- Future of AI from ANI to ASI (Source- Viso Suite)

Considering the following futuristic actions are promising –

i. Global real-time dynamic economic modelling- AI tools/ agents created with the help of Artificial General Intelligence (AGI) can analyze local to global economic/political/geopolitical news, their impact on prospective delays in fulfilling orders, integrating climate data, tracking emissions and following the trajectory of Nationally Determined Contributions (NDCs) . It will also track national goals and policies in rea time and will red flag any procurement that violates or leads to higher emission impact. In major projects that last for multiple years, like rail/metro/port/highways, AGI not only will negotiate price but will also create a contractual risk profile in real time for the project, considering geopolitics, environmental delays, inflation, social-political-economic impact etc. It will help in stabilizing procurement in the long term and bring much-needed resilience to the system.

ii. Self-Evolving Procurement Policy-Based on budget cuts or budget target and environmental/sustainable push, AGI can evolve procurement policy without crossing the threshold of budget and meeting sustainability and green targets on track. It would make procurement policies a living document and not regulatory hurdles faced by buyers across the globe. It will help in bringing international players, improve the ease of doing business.

iii. Zero Delay Public Services and Procurement- Artificial Superintelligence (ASI) can study social media posts, localized economic/ health/social data, and monetary and fiscal policy. Infra project monitoring and executing work, the AI will execute procurement or identify a project even before demand from the citizen or the political class. For example, if social media posts flagging water leakages have increased, ASI can study it forecast the demand and execute work for water projects, or if data shows kids are falling sick in a particular demographic area with diarrhoea, ASI can execute projects for water plant, check the inventory of the medical department, and prepare a policy for the same.

iv. Autonomous Infrastructure Project Monitoring & Contract Execution – ASI will monitor infrastructure projects in real time with help of drones, IOT sensors, can levy a penalty to the contractor for errors or delayed project execution, can execute the contract make payment to contractors as per provisions of the contract. It will improve the quality of infrastructure projects and increase transparency in the system.

Considering India’s expenditure of Rs. 66 Lakh Crore stakes are very high in public procurement; this staggering amount, closer to 20-22% of GDP, is too high for anything less than the highest form of integrity and efficiency. The government has focused on the theme on minimum government, maximum governance has started pushing GeM, CPPP, along with various initiatives across various ministries, departments and the results are promising. Also Government is promoting use of AI tools across the governance model, including public procurement. Artificial Narrow Intelligence (ANI) is proving how use of technology can improve efficiency and transparency, but with the advent of AGI and ASI we can expect huge revolution in governance, public finance. But we should be self-reliant in age of AI, we cannot solely depend on Western technology. The government should bring policy to promote Indian made AI tools for this critical sector, which will be the backbone of digital national security, long-term national resilience, and sustainable growth.