Public procurement can power Indian startups with Rs 88,000 Cr opportunity, finds new report

In a move to bridge the gap between India's burgeoning startup ecosystem and the vast untapped potential of government demand, a new report titled “Public procurement: Unlocking India’s Rs 88,000 crore startup opportunity” was launched on July 5, in collaboration with the Jain International Trade Organisation (JITO).

The report spotlights how public procurement, currently valued at Rs 88 lakh crore annually, or nearly 25% of India’s GDP, can become a powerful catalyst for over 1.59 lakh DPIIT-recognised startups, many of which continue to struggle with market access, despite contributing $140 billion to the GDP in FY24.

More than just revenue: Contracts that build credibility

While Indian startups have added $140 billion to the country’s GDP in FY24 and are contributing to employment at scale, many still struggle with the single biggest hurdle - access to markets. The report argues that public procurement, if designed strategically, can be more than just a revenue stream. It can serve as a platform for visibility, credibility, and validation -- three essentials that startups need to break out and scale. A government contract, it notes, not only opens doors to enterprise customers but also builds investor confidence.

Insights from Rajasthan’s iStart initiative highlight how startup-friendly procurement reforms can catalyse growth. Survey findings show that 76% of startups reported enhanced credibility after receiving government contracts, 69% experienced revenue growth of up to 45%, 88% expanded their workforce, some by over 140%, and 70% saw a sharp rise in investor interest.

Even a 0.01% allocation of India’s total procurement budget of Rs 888 crore could support hundreds of early-stage ventures. A 1% allocation would unlock a game-changing Rs 88,000 crore market for startups.

Reform in action: Rajasthan’s procurement model

Rajasthan has emerged as a national leader in this space. Through its iStart program and e-Bazaar platform, the state has supported over 6,133 startups, created more than 39,500 jobs, and attracted Rs 1,000 crore in investments. More than 128 work orders worth Rs 24 crore have been issued to 469 startups, with some recording revenue growth of up to 3,500%.

The e-Bazaar platform, backed by a Rs 25 crore corpus, allows for direct procurement of up to Rs 75 lakh, bypassing legacy tendering systems. In a significant policy milestone, Rajasthan also became the first Indian state to amend its RTPP Act to remove eligibility conditions such as minimum turnover or prior experience, enabling early-stage startups to compete for government contracts on equal footing.

“Before iStart, MTAT had potential but limited pathways. After iStart, we gained access to real work orders, direct procurement, and institutional trust. It didn’t just open doors; it unlocked a new chapter of credibility, growth, and scale,” said Rishabh Sharma, Founder, MTAT.

Nitin Gupta, Co-founder of Handpickd, shared, “For us at Handpickd, a government work order wasn’t just a contract — it was momentum. It helped us cut through inertia and shift from reactive execution to strategic problem-solving. More than scale, it changed our mindset. When structured mentorship and public trust meet private agility, startups evolve from idea builders to nation builders.”

A growing national movement

Other states are following suit. Kerala’s GaaM initiative and relaxed procurement norms have benefited 141 startups with Rs 17 crore worth of contracts. Tamil Nadu’s TANSIM platform allows direct orders up to Rs 50 lakh and has eased eligibility requirements. Karnataka has empanelled nine startups under its 10% preferential market access policy. Gujarat and Telangana have also rolled out procurement reforms aligned to their sectoral strengths, from biotech to clean energy, supporting over 300 startups in the process.

The economic benefits of these contracts go beyond revenue. Average revenue growth stood at around 50%, with the highest recorded at 3,500%. Many startups leveraged their contracts to raise additional capital from banks, venture funds, and angel investors. 88% increased their workforce, with 11% recording over 142% employment growth. “Government procurement transforms startups into institutions of growth. It gives young companies the credibility to hire boldly and solve complex challenges,” said Ashwini Purohit, Founder, Edify.

Systemic bottlenecks remain

Despite this momentum, structural challenges remain. Around 26% of startups surveyed said they struggled with eligibility norms or lacked awareness of available procurement opportunities. Another 23% cited documentation and application processes as major bottlenecks. Only 3% of the startups received more than 10 work orders, highlighting limitations in scaling through the current frameworks.

To address these issues, the report recommends a structured roadmap that includes the creation of a unified national procurement portal, relaxation of eligibility norms (such as EMD waivers and turnover relaxations), and the setting of startup-specific procurement targets at the departmental level. It also advocates for ensuring timely payments through enforcement of the 45-day rule and the introduction of a Startup Invoice Discounting Scheme.

Additional recommendations include quarterly investor demo days, co-innovation challenges in high-priority sectors, and transparent performance tracking via annual procurement reports and real-time dashboards.

Procurement as policy: Expert perspectives

“Public procurement is no longer just a transactional activity—it’s a catalytic policy instrument,” said Nilaya Varma, Group CEO and Co-founder, Primus Partners India. “Evidence-based scalable procurement reforms combined with digital platforms can deliver inclusive growth, employment, and innovation-led economic resilience at scale.”

Charu Malhotra, Co-founder and Managing Director, Primus Partners India, added, “The Rajasthan model proves that when evidence-based policy meets strategic procurement, government transforms from a mere buyer to a catalyst for innovation, jobs, and regional economic growth. It’s a scalable playbook India must now mainstream to power inclusive, startup-led development.”

Ramakrishnan M, Managing Director, Primus Partners India, said startups need more than funding—they need customers, credibility, and a pathway to scale. “Even a 0.1% allocation of government demand through public procurement can unlock market access, financial stability, and investor confidence, especially for ventures beyond Tier 1 cities. A fractional shift in buying power can turn unmet startup needs into engines of jobs, innovation, and economic resilience. Public procurement isn’t just a contract—it’s the bridge between entrepreneurial potential and opportunity.”

Amit Purohit, Vice President, Primus Partners India added that for startups, government procurement isn’t just a contract - it’s a mark of credibility and market validation. “With progressive policy support, digital integration, and reduced entry barriers, public procurement can deliver revenue stability, investor confidence, and new market opportunities, especially in India’s emerging regions.

“Rajasthan’s e-Bazaar has shown what’s possible when governments shift from facilitators to customers, turning public demand into a game-changing growth platform for startups beyond the metros.”

The time to act is now

As India aspires to become a $5 trillion economy, structured startup participation in public procurement can unlock massive untapped potential, transforming the way the government partners with innovation. The models exist. The opportunity is real. The time to act is now.