India’s agriculture trade is at a crossroads. When India grew to become an unbiased nation 75 years in the past, agriculture was the motive force of the economic system, contributing greater than half of the nation’s GDP. Immediately, India continues to be one of many world’s largest and most diversified meals producers, and agriculture—the supply of greater than 20 p.c of India’s revenue—stays a central a part of the economic system.
However there are important issues holding again the nation’s untapped potential. If solved, a flourishing agriculture trade may each enhance the economic system and considerably enhance farmer livelihoods and revenue. By 2030, agriculture may contribute round $600 billion to India’s GDP—a rise of fifty p.c over its contribution in 2020. However to get there, India should unlock progress and productiveness for the sector.
The important thing to increasing India’s transformation right into a farming powerhouse is agricultural know-how, or agtech. India lags behind developed farming nations in agtech. Merely put, India’s farmers are competing at a drawback: half lack fundamental farming gear, three of each 4 farms are liable to crop injury from pests and climate, and 50 p.c of India’s farmers lack entry to conventional financing sources. Those that can get credit score usually pay inflated curiosity of 10 to 25 p.c above market charges.
On this article, we study agtech’s potential, how it’s already enhancing outcomes, and what traders are in search of as rural India embraces trendy farming. Agtech is usually a shot within the arm for India’s farmers, making them extra worthwhile and boosting the contribution of agriculture to India’s economic system.
Traditionally, the farmer was simply one of many many stakeholders concerned in a market that centered on mandis—the native markets the place farmers promote their merchandise at public sale. The appearance of digital applied sciences and the evolution of a number of agtechs have put the farmer proper on the coronary heart of the complete ecosystem. Options have begun to be extra farmer-centric: every a part of the worth chain that’s digitizing, be it finance, inputs (merchandise wanted to develop crops akin to seeds, agrochemicals, and fertilizers), or advisory—are immediately focusing on the farmer.
Agtech is already boosting Indian agriculture
Between 2013 and 2020, the agtech panorama in India grew from lower than 50 start-ups to greater than 1,000, fueled by elevated farmer consciousness, rising web penetration in rural India, and the necessity for larger effectivity within the agriculture sector. Furthermore, India’s regulatory surroundings is steadily evolving to facilitate the expansion of digital applied sciences in agriculture.
Agtech in India continues to ramp up—from core firms within the worth chain utilizing digital applied sciences like “tremendous apps” to improvements by start-ups, or “agrifintechs,” and huge know-how firms.
Totally nurtured, the agtech ecosystem has the potential to propel Indian farmers’ incomes to develop by 25 to 35 p.c.
Present agriculture incumbents use digital applied sciences to both go direct to the farmer or to broaden services throughout adjacencies. Suppliers have gotten patrons, advisers are including finance—any mixture is feasible and occurring:
- Suppliers of farming provides akin to agrochemicals, fertilizers, and seeds are utilizing know-how to create direct-to-farmer gross sales channels that bypass middlemen and retailers. For instance, UPL (historically a core agrochemicals participant) is promoting on to farmers via its nurture.farm digital platform. The corporate has additionally expanded to offer financing, advisory, and market providers.
- Companies, together with banks and nonbanks, primarily engaged in offering finance via farm and rural loans, are utilizing know-how to higher perceive the farmer, present focused merchandise, and scale back mortgage dangers. For instance, the State Financial institution of India (SBI) developed the YONO Krishi app to fulfill farmers’ finance, inputs, and advisory wants.
- Firms that promote farm gear have additionally began offering mechanization as a service to farmers. Mahindra, for instance, provides a tractor rental service.
- Companies that function in procurement, processing, or the promoting of agricultural merchandise have began to combine backward into the availability chain and create market linkages for the farmer. For instance, ITC, a core outputs participant, used its e-Choupal community to broaden direct-from-farm procurement over the previous 20 years. It has now launched the ITCMAARS tremendous app. Utilizing a partnership strategy, the app offers farmers entry to trendy instruments, high quality inputs on the proper costs, and finance.
Totally nurtured, the agtech ecosystem has the potential to propel Indian farmers’ incomes to develop by 25 to 35 p.c , and add $95 billion to the Indian economic system, via discount of enter prices, enhanced productiveness and worth realization, cheaper credit score, and various incomes (Exhibit 1).
The federal government’s position in enabling agtech
India’s authorities has additionally taken a number of coverage steps and carried out pilots to foster know-how and innovation within the agricultural sector:
- Simpler digital attain via farmer collectivization. The federal government has promoted farmer–producer organizations (FPOs), granting $750 million to arrange over 10,000 FPOs within the subsequent 5 years. FPOs collectivize the in any other case fragmented farmer base, serving to agtech firms (akin to Samunnati) to simply entry and scale up their enterprise fashions.
- Growth of the “agristack.” India is making a unified database of agricultural information units, which will likely be linked to farmers based mostly on their land holdings. This can allow agtech firms to customise choices and merchandise based mostly on farmers’ wants, which range by land measurement, crop sown, and soil situations.
- Digital soil-health playing cards. A digital soil-health-card program entails mapping soil composition and high quality on the farmer stage. It may assist agtech firms in India to advertise precision-farming initiatives and tailor choices for particular farmer teams.
- Digitally enabled direct profit switch in fertilizer gross sales. This initiative immediately transfers subsidies for fertilizers and different items to the farmer. It authenticates the farmer’s id at factors of sale and thru verification. It may considerably encourage the adoption of fertilizers and scale back leakages in transportation, sustaining affordability for smallholder farmers.
- Nationwide Agriculture Market (eNAM). This pan-India digital on-line buying and selling portal connects current Agriculture Produce Market Committee (APMC) mandis, forming a unified nationwide marketplace for agricultural commodities that ensures higher costs for farmers via the clear public sale course of.
- Agricultural Accelerator Fund and digital public infrastructure. The federal government has just lately introduced a brand new fund for selling the agtech ecosystem, doubtlessly seeding new start-ups that will enhance digital adoption and the vary of digital options accessible to farmers. Moreover, the federal government introduced its intent to construct an open-source digital public infrastructure that may possible help agtechs with related data providers throughout the worth chain.
These initiatives are constructing an agtech ecosystem within the nation, supporting farmers in areas the place they want probably the most assist.
What are traders in search of?
With authorities initiatives and the openness of farmers to tech adoption, agtechs are poised to have interaction with India’s farmers, however to achieve success, they may want secure sources of funding and a vibrant, supportive ecosystem.
Agriculture know-how in India has flourished with the rising consideration from enterprise capital (VC) lately. Accel and Sequoia Capital invested in firms akin to Samunnati, Ninjacart, DeHaat, and Bijak. In the course of the previous 4 years, agtechs in India have raised roughly $1.6 billion. VC corporations invested greater than $1.2 billion in 2022 alone via 114 offers, a 50 p.c enhance from 2021 and triple the funding made in 2020. The typical deal measurement is rising, indicating that start-ups are maturing on this area regardless of an financial slowdown through the previous two years (Exhibit 2).
Of 9 agtech classes, 90 p.c of all VC funding was directed at 5 classes in 2022 (Exhibit 3):
- Finish-to-end ecosystems: These are platforms that play throughout the worth chain and have a major presence in a number of segments, akin to inputs and outputs. In 2022, such corporations, for instance, DeHaat, attracted greater than $113 million in funding.
- Digital options and precision agtech: These are digital options or merchandise which give farmers with providers akin to advisory, precision farming and sensor-based options. In 2022, firms akin to Cropin attracted greater than $92 million in funding.
- Midstream agtechs: These are agtechs that assist present provide chain options that enhance efficiencies in areas akin to logistics and warehousing. In 2022, corporations akin to Arya attracted greater than $80 million in funding.
- Agribiotech: These are agtechs that leverage biotechnology to create inexperienced and sustainable new merchandise, or elements akin to meals components. In 2022, corporations like String Bio attracted greater than $63 million in funding.
In contrast to the remainder of the world, the place agricultural funding has centered on progressive meals—suppose Unimaginable Burgers or different plant-based meals—funding in India has centered on the fundamentals: financing and know-how to enhance agriculture and farm practices and to keep away from local weather dangers (akin to droughts, pests, and flooding).
In consequence, traders strategy India with a special view. Our interviews with VC corporations counsel that they give attention to 5 elements when making selections about new applied sciences: the scale of the market, the breadth of choices, traction with clients, a capability to scale, and the X issue (intangibles akin to the training curve it takes to make use of the brand new applied sciences effectively).
Develop or die: Agtech success in India
Buyers in Indian agtech are, or must be, asking some fundamental questions, together with the next.
Does an agtech put money into a number of touchpoints and a breadth of choices? In contrast to e-commerce, agtechs get low transaction volumes for farmers however pay excessive acquisition prices, akin to to get a farmer to put in an app and take a look at a product. That is difficult by the ceaseless efforts of a number of agtechs and incumbents to enter the area, reducing prices, and the farmers themselves being prepared to experiment with a number of apps within the quest for many worth.
To beat this problem, start-ups akin to Gramophone, Samunnati, DeHaat, and extra are providing extra touchpoints and broadening their product portfolios to offer providers throughout the worth chain, from inputs and financing to advisory. Even platforms that begin out with a single use case are increasing into adjoining components of the worth chain.
Does the agtech embrace a ‘phygital’ mannequin? In rural India, each bodily and digital infrastructure are essential. Though 75 to 80 p.c of farmer households have entry to a smartphone, most nonetheless want to have bodily touchpoints for digital help akin to tutorials or assist with app set up. Agtechs akin to Agrostar and DeHaat have area groups to make on-ground visits and to drive campaigns for larger penetration of their apps.
One method to help a buyer: the ITC e-Choupal ecosystem has managed to bridge the hole in rural digital infrastructure via a community of central sanchalaks (overseers), who act as bodily touchpoints for the ecosystem and on whom farmers proceed to rely.
In-person contact with the farmer can occur in a number of methods. Area representatives are one possibility. Different examples embrace a fertilizer provider’s presence in India’s native micromarkets or rural financial institution branches for agrifintechs.
Is the agtech charging for the suitable services or products? The fitting monetization mannequin is essential. Some corporations try to monetize advisory providers, however most farmers—not simply Indian farmers—are reluctant to pay for recommendation. Usually, recommendation is a gateway to enterprise, not a enterprise itself.
Is the agtech gentle on property? Agtechs that rely much less on investments in property can scale up throughout geographies shortly. For instance, Agribazaar had reached $2,250 million of gross merchandise worth in fiscal 12 months 2021, with a fixed-asset base of round $2.5 million. It did so by shifting the accountability of storage, high quality checks, and transport to patrons and sellers on the platform for almost all of transactions.
Agtechs that require investments in bodily infrastructure or property sometimes attempt to hold their fashions depending on native entrepreneurs who make the investments in gear and services. For instance, DeHaat and Agrostar use village entrepreneurs to offer last-mile service and deliveries inside villages, enabling them to combination demand and ship bigger volumes.
The potential for a bumper crop Indian agriculture
The traders and agtechs that navigate India’s distinctive hurdles might even see boundless potential. The following three to 5 years will likely be crucial for incumbents and new gamers.
It possible gained’t develop into a winner-takes-all market. A number of main gamers, particularly these with robust provide chain linkages to the farm (akin to DeHaat, UPL’s nurture.farm, and ITC’s MAARS), may emerge as dominant gamers on this area. These firms may help a bunch of smaller, area of interest gamers that may in flip leverage the end-to-end platforms for progress.
Collaboration will likely be essential. Whereas agtechs may facilitate higher resolution making and change guide farming practices like spraying, lowering dependence on retailers and mandis, incumbents stay essential within the new ecosystem for R&D and the availability of chemical compounds and fertilizers.
There are profitable platforms already rising that supply farmers an umbrella of services to handle a number of, crucial ache factors. These one-stop store agri-ecosystems are additionally making a bodily spine/provide chain—which makes it simpler for incumbents and start-ups to entry the fragmented farmer base.
Agtechs have a novel alternative to develop into very best companions for firms looking for market entry. On this state of affairs, current agriculture firms are creating worth for the farmer by having extra environment friendly and cost-effective entry to the farmer versus conventional manpower-intensive setups. It’s a system that builds: the extra agtechs know the farmer, the higher merchandise they will develop.
India’s farms have been placing meals on the desk for India and the world for many years. Digital applied sciences may improve manufacturing at each step, from high-quality agriculture inputs to world-class agriculture outputs. This might assist create sustainable progress for the Indian farmer, enhance financial fortunes in rural areas in a flourishing ecosystem, and profit the complete economic system.