Background and Introduction
Agriculture continues to be a major source of income, employment, and livelihood in India which has about 138 million farm holdings that include 92.8 million marginal holdings and 24.8 million smallholdings (Census, 2011). About 85 percent of the total holdings are small and marginal and their share in the total operated area is 44.6 percent. Every year around 1.5 to 2.0 million landholdings are added to the marginal and small sector due to subdivision and fragmentation of land. The fragmentation of farmlands has rendered them economically nonviable for the farmers to adopt the latest technologies but also to use high-yielding varieties, inputs like seeds, fertilizers, and adopt mechanization. Further limited access to markets and the absence of institutions to safeguard farmers’ interests, they are unable to integrate with the agricultural value chains, fight the risks and vulnerabilities such as commodity price volatility, crop failure, and insect pest attacks, etc on their own.
According to advance estimates by the government in the Economic Survey 2020-21, GDP contribution by the agriculture sector is likely to be 19.9 percent in 2020-21, increasing from 17.8 percent in 2019-20. Further, the farming community’s exceptional endurance amid COVID-19 resulted in agriculture being the only sector to post growth (3.4%) at constant prices in 2020-21, while the entire economy contracted by 7.2 percent. Currently, the sector is valued at US$ 370 billion and is likely to witness exponential transformation in the future because of supportive government policies and technological advancements. Secured Governance (SG) is a mechanism that acts as a growth center for the individual sector with all other sectors playing a supporting role for sustainable growth and development. The very concept of “Secured’’ here implies a secured convergence or meeting with various sectors defining a growth for an economy.
AgriTech in India
Rising tech awareness among the farmers, driven by high internet penetration and mobile connectivity, is expected to drive the farming sector. Both central and state governments are also playing a very active role in agriculture sector development by creating incubators, awarding grants, focusing on public-private partnerships, and formulating enabling policies. The favorable impact of these initiatives is expected to peg the market valuation at US$ 30-35 billion by 2025, according to Bain and Company’s “Indian Agriculture: Ripe for Disruption” report. The report further cited that India’s agricultural value chain is anticipated to witness more growth (by value) across the entire ecosystem in the next two decades. This will radically alter the way India and the rest of the world produce and consume agricultural goods.
Driven by these strong tailwinds, PE and VC investments are also accelerating in this space. India is the world’s third-largest recipient of AgriTech funding after the US and Germany and has the third-largest number of AgriTech start-ups after the US and the UK. In 2020, India received investments worth US$ 329 million from PE/VC firms and registered a staggering CAGR of ~53 percent from 2017 (US$ 91 million) to 2020 (US$ 329 million).
Indian AgriTech start-ups have significantly attracted investors from across the globe. Following is the list of prominent AgriTech start-ups that have received significant funding:
|Activex Animal Health Technologies||A veterinary doctor platform for extending immediate assistance and real-time teleconsultation to animal owners|
|SNL Innovations – InnoFarms||A provider of processed vegetables and fruit pulp directly extracted from partnered farms|
|EF Polymer||Developed an Eco – friendly water retention polymer for water conservation|
|A2P Energy Solution||An AI-Powered waste Management system company|
|Agsmatric Technologies||A data analytics platform to enhance crop yield by precise irrigation|
|Kyari Innovations||A firm working towards extenuating human-wildlife conflicts by devising innovative mechanized scarecrows|
By expanding the total agricultural output, institutional and technological reforms, efficient post-harvest management, etc., the government is planning to double farmer incomes by 2022. E-NAM (National Agriculture Market)—an online trading platform—was launched in 2016 for agricultural commodities; the platform unifies all Agricultural Produce Market Committees (APMCs) mandis to form an integrated national online marketplace for agricultural commodities.
The strategy to promote 10000 Farmer Producer Organizations in the country aims to address various challenges faced by smallholder farmers. Farmer Producer Organizations have a greater potential and role to play in promoting and strengthening the capacities of smallholder farmers. This innovative institutional form can link smallholder farmers to local, regional, national, and international markets effectively by facilitating their members to access technical, capacity building, training, financial, and other input services. To surpass this effective and viable profit-making these institutions need to be competitive with other companies and competitors in the market and has a huge potential to capture the future food retails not only in India but in the world. Various initiatives are intended towards increasing farmer net income, encouraging private investments in the sector, enabling free movement of agricultural produce, and boosting technological advancements. After the implementation of these three laws, new opportunities are likely to be created for various agricultural businesses in the Indian market.
The COVID-19 pandemic has disrupted businesses across many sectors globally, including India. Nevertheless, the recent growth of the AgriTech market in India reflects its enormous unrealized potential. Increased rural Internet penetration and the greater affordability of digital technologies assisted by rising investor interest have led to the ongoing digital transformation of the farming ecosystem. But what are the most promising opportunities today, and how can India capture the full potential of AgriTech to drive the next green revolution?
Indian AgriTech market at a glance
Indian agriculture has come a long way from being state-focused in ensuring food security to becoming a major producer in the world. Indeed, Indian agriculture has the potential to become “the food bowl of the world” if India emphasizes
- Building efficiencies into the agricultural produce trade,
- Integrating quality standards as part of trade practices, and
- Optimizing production costs for price competitiveness.
Agriculture is the primary source of livelihood for about 58 percent of India’s population. This and allied sectors accounted for 17.8 percent of gross value added in India (at current prices) in the financial year 2020-2021. While COVID-induced lockdowns took a toll on industry and services, agriculture remained buoyant and helped sustain consumer demand. As per industry estimates, consumer spending in India will return to growth in 2021 after the pandemic-led contraction, expanding by as much as 6.6 percent.
India’s food industry is poised for massive growth, increasing its contribution to the world food trade every year due to its immense potential for value addition, particularly within food processing. The food processing industry is one of the largest in India, accounting for 32 percent of the country’s total food market and ranking fifth in terms of production, consumption, export, and expected growth. (Source: IBEF)
India also enjoyed significant growth in agriculture exports during 2020-2021. According to the Ministry of Commerce & Industry, the export of agriculture and allied products grew by 17 percent to US$41.25 billion in 2020-2021 after being stagnant for the past three years. Momentum is expected to sustain in the coming years with new businesses entering and converting challenges into opportunities. But several challenges have beset Indian agriculture for a long time and solving them is vital to the growth of AgriTech and to the overall development and rural prosperity. Challenges include low farm productivity, fragmented land holdings, lack of storage infrastructure, and high indebtedness – all of which contribute to persistent agrarian distress. The fragmentation of holdings, where around 80 percent of Indian farmers till less than a hectare of land each, results in low economies of scale, limited access to technology, high marketing costs, and low productivity.
Changing contours of Indian agriculture
Agribusiness growth is being driven by rising demand, changes in food consumption habits, and a need to respond to environmental change. By 2030, India will have the world’s largest population, representing a third of Asia and 17 percent of the world. (Source: UN) This implies a massive growth in agricultural demand with income growth accelerating consumption of meat, fruits, and vegetables relative to cereals. This will call for commensurate shifts in output, adding pressure on natural resources.
Changing environmental conditions are steadily diminishing productivity in agriculture. According to the IPCC, greenhouse gas emissions have been growing at an alarming pace. The resultant rising temperatures have severe implications for ecosystems, affecting every aspect of food production and quality. New challenges in pest and disease management, unpredictable supply, and the rising cost of raw materials, among other issues, will emerge. To improve quality, reduce the time from farm to fork, and ensure food safety, businesses and government must evaluate the development of, and risks along, the entire supply chain.
Challenges Inhibiting the growth of Indian AgriTech
Realizing the potential of India’s AgriTech sector will hinge on how effectively India can tackle the challenges holding it back. Factors inhibiting AgriTech growth include:
- Lack of financial services. Adoption of financial services (e.g., credit and insurance) is limited in Indian agriculture. In its 2019 report, the Reserve Bank of India estimated that only about 40 percent of farmers have access to formal credit despite many initiatives to include farmers in the banking system.
- Limited digital infrastructure. The penetration of digital infrastructure and digital records in the Indian agriculture value chain is limited. Robust digital infrastructure in the country, consisting of satellite imaging, soil health information, land record, and cropping pattern and frequency, can help make the value chain more effective.
- Issues in market linkage. Today, 85 percent of Indian farmers get prices 40 percent of, or lower than, the minimum support price, with no access to buyers outside the mandis. Issues in market linkage must be solved to strengthen the economic conditions of farmers.
Exploiting new technologies from adjacent Industries
Technology advances in recent years are reengineering the value chain to solve both demand- and supply-side issues in the Agri sector. Cutting-edge technologies (e.g., artificial intelligence, the Internet of Things [IoT], machine learning, big data, and blockchain) are poised to transform the sector by enabling higher productivity, superior quality, traceability, and real-time visibility while reducing the carbon footprint and increasing profits. These technologies can solve some persistent problems of Indian agriculture.
An enhanced focus on cost, quality, and reliability are critical drivers of the increased adoption of precision agricultural technologies and automation. The large volumes of data generated through farms can be captured, processed, and valorized through advanced analytics to provide real-time insights to farmers and power timely and effective decision making, reducing production costs, and improving yields. With labor becoming increasingly expensive and precision technology becoming more affordable via economies of scale, we envisage faster adoption of advanced solutions in Indian agriculture. We also foresee the growing startup community creating affordable quality solutions across innovation categories, which can be exported to other developing and developed geographies, (e.g., Africa and parts of the West), and the strengths of its AgriTech sector are becoming all the more evident. (see table below).
AgriTech: Technology to the Rescue
|Lack of assessment of crop health in real-time||Satellite Imagery|
|Determination of optimal time to plant||Mobile application for sowing|
|Real-time feedback of the impact of farmer’s techniques||Big data analytics|
|Long-distance travel for the procurement of seeds and nutrients||Input marketplace|
|Presence of middlemen||Farm–to–retail linkage|
|Higher cost of mechanization with state – of – the art equipment||Farm equipment rental|
|Lack of quality assessment, counterfeiting||Smart Supply Chain|
India’s fast-growing Agri-tech market
AgriTech’s incredible pace of growth in India is turbocharged by the entry of younger agriculturists with a greater understanding of technologies, along with access to capital. Capturing the attention of numerous entrepreneurs and investors, Agri-tech has made big strides in the following:
- Market linkage. Farmers are rapidly adopting market linkage solutions in India. They enable them to partner directly with the aggregators that sort and pack the produce and resell it to retailers or customers, providing better prices to farmers.
- Farm inputs. To increase productivity, different inputs including water, agrochemicals, labor, and capital must be used judiciously; farm inputs solution providers are increasingly using their agronomy knowledge, data, and technology to suggest solutions to Indian farmers.
- Precision farming. Poor agricultural practices and lack of knowledge of scientific farming techniques among Indian farmers have kept productivity below global benchmarks. Precision-farming solutions collect farm-specific data about soil, weather, pests, and so forth, by using IoT sensors or geospatial technology and combining analytical capabilities to provide timely insights. This information helps manage farming systems, often in real-time, through the precision application of inputs (e.g., agrochemicals and water).
- Farming-as-a-service. Farm mechanization in India is low, at 40per cent to 45 percent compared to 95 percent in the US and 57 percent in China. (Source: The Economic Times) Offering services like on-demand machinery rental, field leveling, and pesticide spraying improves productivity.
- Financial services. Lack of access to organized credit, lack of collateral, and high interest by private lenders have impeded growth for most Indian farmers. Financial services solutions in Agri-tech are tackling the issue by using technologies such as micropayments, secure banking systems on mobile phones, real-time market prices, and remote monitoring to ascertain the creditworthiness of farmers for small-ticket loans.
Beyond these, increased rural Internet penetration, access to technologies and devices, and a rise in supply chain challenges for farmers have paved the way for more than 1,000 startups in Agri-tech subsectors (see figure below). These startups are trying to fix issues (e.g., land pooling), high-interest-rate loans, and inefficient cold chains, with the help of technology and innovative models.
In the last five years, funding has grown nearly 10 times, with more than US$400 million of investment in 2020 from US$40 million in 2016. The trend is expected to continue; funding could grow to US$10 billion by 2030. Yet the potential of the Indian Agri-tech sector has barely been tapped. Industry estimates of the total addressable market for food processing and Agri-tech amount to US$24 billion. Going by these estimates, the current penetration of Agri-tech in India is less than 1% of overall Indian Agri-tech potential. Adequate investment, infrastructure, and innovation could help India create 25-30 million entrepreneurs in agriculture, increasing rural prosperity by an order of magnitude. (Source: Inc42)
The 3Is: Innovation, Infrastructure, and Investment
Technology-led innovations supported by investments can bring India on par with its global peers. The focus needs to be on the 3Is: Innovation, Infrastructure, and Investment.
Innovation. In India, there is a considerable disparity in the adoption of digital agriculture technologies between global companies and those at the local or community scale. There is a need for innovative business models that provide viable digital solutions for small-scale farmers. Developing disruptive Agri-tech business solutions will need more capital and the ability to link them with the market and consumer. Forming “innovation clusters” in regionally contiguous zones can enable a wider ecosystem for innovation by driving interfirm linkages, collaboration, and networks. With heightened economic activity and technology advancements, the clusters provide a budding platform to technology startups. To raise productivity, ensure food security, and become a net exporter of food products and intellectual property, India needs to promote innovation clusters with goal-oriented efforts (see sidebar).
Infrastructure. Indian agriculture is characterized by a high level of pre-consumer waste, which partly explains why many in India still go hungry even though the country is a leading food producer. Food waste also harms the environment. Most ends up in landfills, where limited oxygen availability impedes its decomposition, creating methane, which is 28 times more harmful than CO2. (Source: The Washington Post)
Large-scale investments are needed in post-harvest infrastructure, including near-farm warehouses and captive cold chains, to reduce waste. And supply chains between farmers and consumers need to be transformed. They are notoriously opaque and inefficient with numerous intermediaries, poor data collection, and institutionalized practices of adulteration and pilferage. And post-consumer waste should be avoided. Enabling digital technologies can improve traceability, reducing waste and operational delays for supply chain players.
Innovation clusters in action
- Agri-horticulture park Innova was set up in Malur, Karnataka, India, with the motto to double farmer’s income by 2020. Horticulture parks bring best-in-class technologies/infrastructure to create and deliver value to both farmers and businesses by linking farmers and consumers. The food park’s focus is on making a positive and meaningful difference to farmers’ lives through business.
- The Netherlands Food Valley, a region where international food companies, research institutes, and the Wageningen University and Research Centre are concentrated, is home to many food multinationals. Within the Food Valley, about 15,000 professionals engage in food-related sciences and technological development. The regions form a dynamic center of knowledge for the international food industry designed to enable food manufacturers and knowledge institutes to work together on innovative food concepts.
Investments: A very low percentage of India’s farmers have access to finance from formal sources. Given the economic and social importance of agriculture to the economy, addressing fundamental financial challenges in agricultural and allied sectors is critical. Apart from microlending, extensive investments must be made in farmer training at the grassroots level. The experience of other countries and encouraging results of successful farmer education initiatives and collaboration with other value chain actors point the way to the successful digitization of agriculture. Moreover, farmer’s training would allow better adoption of modern and sustainable farming practices.
Smart and Secured Governance – Agriculture Innovation Cluster (Agriculture HUB)
The notion is developing an Agriculture Innovation Cluster under Secured Governance (SG) concept. It will have state-of-the-art facilities, at par with the best in the contemporary international scenarios, duly adapted for local conditions. The project will address complete backward and forward linkages from farmers to the consumers. SG stresses upon utilizing the unique potentialities of place in a way that invigorates the growth of other interlinked sectors in perfect equilibrium.
The methodology stresses upon utilizing the unique potentialities of place in a way that invigorates the growth of other interlinked sectors in perfect equilibrium. The hub will be equipped with facilities for warehousing, food processing, cold storage, central auctioning, ripening chambers, quality control laboratories, one-stop shopping centers, Agri-clinic and extension services, information kiosk, etc. Integration of such facilities will help in shortening the supply chain for the producers who have to traverse a long marketing channel to reach the market due to the unavailability of the necessary infrastructure. By a combination of transportation, storage services, training facilities, and support from other related sectors, Agri-Hubs would emerge as strategic locations that involve end-to-end solutions and improve efficiencies while enabling apportionment of associated capital costs across a larger base of users leading to significant cost reductions.
Smart &Secured Governance concept designed to facilitate an equal opportunity for Private/public sector developers and Development Authority /Government to work together with a single-window clearance system to achieve greater results to bring National progress with profitability to the participating organizations.
This draws up business plans based on the growth potential of infrastructure segments wherein private institutions will act as partners to the Government to foster coordination and create defined clusters of Agriculture HUB.
Secured Governance offers a strategy to get the entire basic infrastructure development with a negligible investment by the owner. It Complements the present PPP developmental model by ensuring balanced participation of the private and public sector taking advantage of value and valuation of infrastructure thereby yielding higher returns. Today we find the valuation due to infrastructure growth is not channelized towards infrastructure development and results in inequalities.
Skill Development: Skill development through training and demonstration will be provided for farmers and seed growers on techniques to be adopted for hybrid seed production. Even provide first-hand information to the farmers in their fields and equip them with the necessary skills to enable them to adopt the improved crop production technologies for higher productivity.
Information & the latest technologies in the field of Agriculture Mechanization are being disseminated to farmers and rural unemployed youth through training programs and demonstrations. Training is conducted for farmers for skill development in the area of adopting new technologies related to new varieties, pest management/control, and adoption of a new package of practices including new implements. Other technology will be supported to enhance the productivity and quality of Agri-products.
- Structured and Integrated development enhances the multi-sectoral productivity;
- Rapid infra development by private parties to get the maximum benefits of valuation at the earliest in the vicinity of the HUB;
- Infrastructure development promotes employment growth and enhances the lifestyle of the local community.
Way Forward …
The Indian AgriTech sector presents a vibrant, untapped potential for expansion. The sector has reached that inflection point where it is gaining significant attention from global investors. As agriculture is termed to be the backbone of the Indian economy, AgriTechs are playing a crucial role by helping farmers digitize the whole supply chain and adapt to using new technologies such as artificial intelligence, the Internet of Things, Big Data analytics, and advanced engineering techniques.
Technology advancements, regulatory changes, and rising investments are causing significant disruptions in the Indian agriculture sector. AgriTechs are foreseen to be well prepared to face industry challenges and seize opportunities in the future. Additionally, the agricultural sector will be creating significant value in the market and now, is the ideal time for businesses to invest and develop capabilities in order to take advantage of the many opportunities.
Dr. P. Sekhar, Chairman,
Unleashing India Global Smart City Panel & MTGF
Dr. Ashok Alur, Director,
Center of Excellence on Farmer
Producer Organizations & Former Vice-Chancellor