What comes to your mind when you think about agriculture in India? A tired farmer ploughing his fields with bullocks under the scorching sun. A drought-stricken field with cracks so deep that they can consume entire families. Truckloads of produce being dumped because it got rotten before it could be sold in the market.
Now imagine drones hovering on fields to provide necessary inputs to the farmer so that he can grow more and sell more. Farmers connecting with one another on dedicated social networks for knowledge sharing and getting expert help. Happy farmers selling their produce directly to consumers and at better margins. No, we are not talking about a fantasy movie! All these are already work-in-progress in the Indian agricultural sector.
Approximately 58% of India’s population is dependent on agriculture as a primary source of livelihood. The sector contributes ~20% to the national GDP. Exports of agricultural and processed food products under the Agricultural and Processed Food Products Export Development Authority (APEDA) basket rose to $20,674 million ( ₹15,30,50 crore) during 2020-21, from $17,321 million ( ₹83,484 crores) in 2011-12, according to data by the Directorate General of Commercial Intelligence and Statistics (DGCI&S). However, despite the sector’s contribution, inherent structural flaws continue to inhibit growth and productivity. In order to address these challenges and improve farmers’ incomes, Indian agriculture is looking towards technology-aided modernization, backed by resilient reforms – this is where agritech plays a pivotal role in shaping India’s agricultural future.
Impact of COVID on Agritech Industry
The first wave of the pandemic saw farmers struggling to purchase inputs right ahead of the harvest season. With limited access to marketplaces and mandis, agri-logistics and transport systems were broken. All of this resulted in mounting post-harvest losses, and the cost of unsold produce hurt the farmers. The traditional ecosystem suffered and pushed a large percentage of farmers to voluntarily turn to tech integrations.
Since access to on-ground advisory services took a hit, more farmers took to online portals to discuss their crop and cattle issues as they could not meet their peers in person. As a result, the number of crops and cattle-related queries on agri-networking platforms increased by 30%.
Businesses like agri-retailers, small equipment manufacturers, who until then had mostly run their business using traditional methods, felt the crucial need for a business-farmer digital network to drive their transactions. With farmers finding it difficult to source inputs locally, an opportunity arose for companies dealing in agri-inputs to sell on e-commerce platforms. On the output side, since mandis were not operating normally, it created an opportunity for startups to build platforms for farmers to put their crops, tractors, and cattle for sale.
Agritech companies also had to find ways to communicate virtually with the users; to inform and educate rural farmers about the advancements and usage of the technological innovations and their services as traveling physically was not possible.
Innovations across the value chain
Startups are building solutions across the different segments within the agritech industry and working towards increasing the farmer’s share in profits from crop sales:
Input market linkage and farming as a service (FaaS) segment
This segment is fast picking up pace in India with prominent players being AgroStar and BigHaat, which offer missed call-based service for farmers ordering inputs and equipment along with cash-on-delivery service. These players have been able to eliminate multiple levels of intermediaries by partnering directly with the producers. Some companies also offer services, such as on-demand machinery rental, field leveling, and pesticide spraying, as a part of farming-as-a-service.
Supply chain, post-harvest management, and output market linkage segment
Players in the segment are involved in the collection, processing, storage, logistics, and distribution of agricultural produce from farmers to end customers or retailers. Inadequate rural infrastructure and lack of traceability along the supply chain have prompted the intervention of agritech players in the segment. Startups including Ninjacart, Waycool, Samunnati, etc. are engaged in this segment.
Precision farming, analytics, and advisory segment
The startups in this segment address structural issues arising out of a lack of knowledge about scientific farming methods and techniques among farmers. These players collect farm-specific data about soil, weather conditions, humidity, pests, etc. using IoT sensors or geospatial technology and use their analytical capabilities to provide timely insights to the farmers. Agritech startups are also coming up with a quality assessment and grading solutions for large agribusinesses and traders. At present, there are approximately 200-250 startups in India dealing with these services. Prominent startups include Clover, Cropin, KhetiNext, Zentron, etc.
This segment comprises agritech startups offering solutions, such as credit, insurance, warehouse receipt financing, trade financing, etc. Inadequate access to organized credit, collateral, and formal documentation is the biggest challenge faced by farmers. Agritech players are leveraging technologies, such as geotagging of farmlands and remote crop monitoring, to build risk profiles of farmers and ascertain their creditworthiness. By partnering with banks, NBFCs, and input suppliers, agritech players offer loans at lesser interest rates than unorganized lenders. This segment is still developing in India and has around 20-40 startups at present, with prominent players being payAgri, Jai Kisan, Aggois, etc.
Garnering investor interest
Ideas like business-farmer network, input e-commerce platform, agri marketplace, etc. got automatically validated due to the need of the hour created by the pandemic and boosted the confidence of the investors.
A Bain & Co report stated that agritech and agri-ecosystem sectors have received significant interest from the investor community, making India the third-largest country in terms of agritech funding and the number of agritech startups.
It added that there are several estimates which indicate that approximately $30–$35 billion of the value pool will be created in agri-logistics, offtake, and agri-input delivery by 2025.
The report further stated that between 2017 and 2020, India received about $1 billion in agritech funding. The top deals in agriculture were investments into companies like Ninjacart, AgroStar, Mahyco Grow, Husk, WayCool Foods and Products, Jumbotail, Vahdam, and DeHaat (Green AgRevolution). Based on the discernable changes in the sector, investments in agritech over the next four to five years are poised to increase significantly.
Aavishkaar, Accel, Ankur Capital, Beenext, and Omnivore were early investors in the sector. More recently, we witnessed funds such as Blume, Nexus, Sequoia, Tiger Global, and RTP investing in the sector.
In 2020, more than 20 agritech start-ups have cumulatively raised more than Rs. 920 crore (US$ 125 million) across equity, venture debt, and conventional debt rounds. Between January and August 2021, agritech startups in India raised $426 million, across 38 deals, over three times more than the same period last year, according to data from analytics firm Tracxn.
With credible entrepreneurs focusing on solving specific problem areas in farming with the use of technologies like digitization, supply chain innovations, big data, machine learning, AI, data analytics, and IoT, investors are increasingly getting optimistic about the agritech space.
Push from the government
The government has been a catalyst in the growth of the agritech sector. It has established the National Center for Management and Agricultural Extension in Hyderabad (MANAGE). In addition, the Department of Science and Technology, GOI, organized a food and agri-business accelerator in association with a-IDEA, TBI of NAARM. The focus area of this programme was accelerating agri-business start-ups by providing mentoring, industry network, and investor pitching guidance.
The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) focuses on conserving water and increasing irrigation coverage in the country. Under this scheme, Rs. 56,340 crore (US$ 7.64 billion) has been allocated for investments in end-to-end solutions on source creation, distribution, management, field application, and extension activities. The government is also planning to grant Rs. 2,000 crore (US$ 270 million) for computerization of the Primary Agricultural Credit Society (PACS), with the primary aim of benefitting cooperatives through digital technology.
The Indian govt. has lent a strong impetus to this sector and aims to double the income of farmers by 2022. Another initiative is the Agricultural Technology Management Agency (ATMA), which facilitates retrieval of data and data entry from web-based portals via a regular mobile phone (without using the Internet). They are operationalizing more than a dozen services of innovative technologies, such as USSD, for farmers and other stakeholders in the supply chain. In addition, there have been many favorable government policies and initiatives such as PM-KISAN, PM-AASHA, and PM-KMY among others that are uplifting farmers and benefiting stakeholders across the value chain.
The Union Budget 2022 has a special place for the agritech sector. As per the Budget, agritech startups and companies will be engaged in public-private partnerships to deliver the latest technology education to farmers and aid in implementation. The FM also announced other policies and government-run funds for agritech startups in the drone and farming-as-a-service segments.
A fund with blended capital raised under the co-investment model will be facilitated through the NABARD to finance agritech startups and rural enterprises relevant to farming. Startups supporting food producer organizations, farm rental services, and other technology such as IT-based support will be eligible for funding under this scheme. Secondly, the use of ‘kisan drones’ will be promoted for crop assessment, digitization of land records, and spraying of insecticides and nutrients. States will be encouraged to revise agriculture education syllabi to meet the needs of modern-day farming and organic farming, value-addition to the agricultural chain. This is likely to boost India’s drone sector, which has thus far been struggling to make deep inroads into the market.
The way ahead
India’s agritech revolution is in a nascent stage with huge untapped potential. It is looking at greater adoption of emergent technology and innovative solutions across the value chain. On the post-harvest side, digitization of food grains, digitization of commodity inventory, transaction systems & processes integrated with real-time data, real-time monitoring of supply and demand embedded in Artificial Intelligence is the highlight of the future. With increasing mobile penetration and decreasing data costs, agritech is poised for disruption via technology. The demand for ready-to-eat meals, healthy & immunity-boosting food choices, safe and processed snacks will become drivers to growth for D2C channels too. Increased attention from venture capitalists and the government alike will leapfrog the industry from the traditional methods to new, technology-friendly ways. Under these changed scenarios, the idea of doubling farmer incomes in the next few years does not seem like a far-fetched idea.
These are exciting times for the industry. If you think you can make a difference in the way India grows, processes, and sells food, it is time for you to return home to India.