Agriculture is the backbone of India's economy. It provides 16% of India’s gross domestic product (GDP) and engages 43% of the workforce. Numerous industries such as consumer packaged goods, chemicals, retail and now e-commerce are extremely dependent on agricultural production output, thereby amplifying the influence of agriculture on our economy.
Why Agri-tech Businesses are picking up
As India’s agri-tech start-ups look at resolving the challenges in agriculture using technology, investors' interest in this space has also been gradually rising. Many leading investors have been chancing on entrepreneurs who are trying to bring Big Data, Robotics, Smart Farming equipment and other technology into farming.
We also notice the surge of many agri-tech entrepreneurs from farming backgrounds themselves. These young men and women study technology from prestigious institutions and then go back to their roots to use it in farming.
Entrepreneurs from agricultural backgrounds have an aptitude for creating effective innovations that disrupt conventional systems and enable stakeholders to jump into a better future. Having seen the problems of the agriculture value chains closely, these individuals understand which problems require fixing and the best ways to do it.
India’s digital ecosystem is seeing healthy headwinds such as the availability and affordability of high-speed internet and a maturing virtual content ecosystem. The convergence of these factors proposes an exciting opportunity for innovation in the agriculture space where market players can tap next-generation technology such as data digitization, data analytics, artificial intelligence, machine learning, Internet Of Things and Software-as-a-Service (SaaS) to break the status quo.
The full potential of Indian agriculture can only be discerned through the widespread adoption of technology. Agri-tech is working for solving several obstacles across the spectrum of formal agriculture value chains and presents a market potential of nearly US$24 billion.
Areas around which agri-tech businesses are developing
Agri-tech players are revamping the way agriculture was traditionally being done across all value chain levels.
- Market linkages’ players are tapping farm inputs segment and seamlessly blending technology with physically available infrastructure to deliver farm inputs at an enormous price certainty.
- Precision agriculture and farm management players are assisting farmers to improve their yields by nearly 30%
- Traceability and quality management players are enabling farmers to obtain better realizations by incentivizing high-quality production
- Players operating in supply chain technology and output market linkages segments are eradicating inefficiencies such as huge wastage of farm produce, which is a win-win case for both farmers as well as consumers
- Financial services’ players serve 30% of farmer households via access to credit, and 65% of farmer households via access to crop insurance
- Supply chain management from farm to plate concept removing the negative role of middlemen.
Business models in the agri-tech space
Disruptive business models are driving inclusive growth in agriculture sector and private equity investments in the agri-tech space have bloomed in the last 4-5 years. Most start-ups would adopt one of these business models for their business;
- Advisory Services where farmers are offered information and advices/solutions via the digital space and mobile apps.
- Peer-to-peer lending platforms which allow lenders to make individual loans to farmers over a digital platform
- Traceability solutions which use a database or ledger to record the origin of commodities from farms which helps in supply chain management
- E-marketplace which connects buyers with sellers online and removes middlemen hassles
- Mechanization platforms which helps equipment owners to lend their equipments like tractors, drones etc to farmers.
The Government’s stand
It is encouraging to see both the central and the state government’s endeavors to facilitate agri-tech in the country. For example, the National Agricultural Market (e-NAM) initiative strives to reduce pricing information asymmetry through an electronic portal for trading. State governments are forging technology partnerships to predict prices of agricultural produce through AI, to help farmers efficiently plan their sowing and harvesting cycles. Motivating localized data compilation on soil health and obtaining access to government research establishments to agri-tech firms can further help expedite the adoption of agri-tech businesses.
Learning from countries like the US and Israel prompt us of building a robust agri-tech policy framework in India that would include collaboration between all market actors such as farming communities, agri-tech businesses, food-processing organizations, and technology service providers and research organizations. Transnational alliances in agri-tech technologies and their operating models can be steered through such a policy framework.
Despite good investment activities in this sector over the past few years, the market openings in the sector are still quite low (~1%). The untapped market potential and opportunities in agri-tech will continue to drive growth in this space over the next decade. The transformative potential of digital on the smallholder agricultural sector is undeniable. In the coming years, it will be the startups, which will disrupt and define this industry.