NASSCOM asks government to review public procurement processes for AI to counter Big Tech pricing

Access a copy of the parliamentary report here: [pdf]

The industry body, the National Association of Software and Service Companies (NASSCOM), has urged the government to review its public procurement processes to give domestic AI foundation models preferential treatment against global Big Tech giants like Google and Meta.

This was revealed in the 17th report of the Committee on External Affairs, titled “India’s Role in Global Tech Diplomacy, Digital Governance, Outer Space Diplomacy, AI and Emerging Innovations,” tabled in September 2026. NASSCOM is a trade association representing over 3,500 member companies, including IT firms such as Tata Consultancy Services (TCS), Cognizant and Accenture India, as well as global capability centres (GCCs) and startups. The full list can be explored here.

NASSCOM acknowledged the government’s investments in AI but warned that these efforts could be undermined without a clear pathway for adopting domestic AI models if local startups are forced to compete purely on price with global Big Tech models. NASSCOM highlighted the following issues:

The lowest-bidder tender trap and Big Tech’s competitive advantage: During its oral evidence before the committee on April 30, 2026, NASSCOM highlighted a critical structural flaw in how government entities, including state governments, procure AI services in ways that could disadvantage government-funded AI developers such as Sarvam AI:

“We do not have an AI inclusion roadmap right now… We are investing in foundational companies like Sarvam AI and BharatGen, who are building India’s AI models, but we are not talking about how they will get consumed by Indians. Government procurement for these models still has to follow the L1 [lowest bidder] tender process.” – Parliamentary Report

NASSCOM cites China’s protected AI market to support domestic developers: NASSCOM’s submission drew a comparison with China’s approach, where its government apparently created a protected domestic market for its homegrown AI models, allowing them to grow and compete against global Big Tech.

“China gave real preference to its own companies for their models to be adopted; if we still compete purely on price with Meta and Google and others, who have spent hundreds of billions of dollars, we will never have a level playing field. We need to look at our procurement processes to ensure that what we are investing in gets some disproportionate preference.” –  Parliamentary Report

The Mercator Institute for China Studies (MERICS), a European think tank, argued in a research paper that the “protected home market” of China has helped large language model (LLM) developers like DeepSeek, as well as the AI ecosystem, including the semiconductor and AI chip industries.

The Committee’s Recommendations: While the parliamentary committee did not explicitly recommend amending the General Financial Rules governing procurement and the L1 (lowest bidder) tender process, it strongly acknowledged the structural bottleneck highlighted by NASSCOM.

“The Committee are concerned that India still lacks several of the basic foundations that would make it a genuine AI power…The Committee are of the view that the gap between India’s demonstrated capability and its realised leadership is not primarily a gap of resources or talent, but of follow-through, adoption pathways, strategic clarity, and the pace at which these foundations are being built. The Government should ensure that the opportunity AI presents for India’s development is not left to be realised by default, but is pursued as deliberately.”

What are the companies under the IndiaAI mission? In March 2024, the Indian government approved an outlay of Rs 10,371.92 crore for the IndiaAI Mission. As MediaNama reported then, this budget was supposed to be used for building “programs and partnerships across the public and private sectors.”

However, according to a parliamentary reply on IndiaAI Mission fund releases, the government reported the following figures as of February 9, 2026:

• 2026–27: It has not released any funds yet, against a budget estimate (BE) of Rs 1,000 crore.
• 2024–25: It released Rs 21.79 crore, against a revised estimate (RE) of Rs 173 crore.
• 2025–26: It released Rs 379.15 crore, against an RE of Rs 800 crore.

These include activities like: 

• Providing compute capacity
• Developing and deploying indigenous large multimodal models (LMMs)
• Streamlining access to quality non-personal datasets for AI innovation
• Development of AI apps and AI-based solutions
• Increasing accessibility to AI programs and courses
• Financing deep-tech AI startups
• Implementing responsible AI projects for “trust and safety”

The report identifies the following 12 companies and initiatives selected under the IndiaAI Mission: 

1. Sarvam AI,
2. Soket AI,
3. Gnani AI,
4. Gan AI,
5. Avatar AI,
6. GenLoop,
7. Zentieq,
8. Intellihealth,
9. Shodh AI,
10. Fractal Analytics Ltd.,
11. Tech Mahindra Maker’s Lab
12. IIT Bombay-led BharatGen initiative (as an academic consortium)

In October 2026, MeitY released a tender document seeking AI computing capacity of over 10,000 GPUs for “ministries, departments, academia, research institutions, startups and industry.” Read MediaNama’s breakdown of the Request for Empanelment (RFE) proposal here.

Also Read:

• MeitY invites AI compute providers to supply 10,000 GPUs under IndiaAI Mission
• MeitY to release consultation paper on AI regulation in a month: Ashwini Vaishnaw

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