Interest, in technology (agritech) has seen a rise recently leading to a surge in startup funding within the sector globally in 2020. Totaling US $26. 13 Billion and showing a 35. 5 Percent jump from the year. The worldwide agritech market is projected to experience growth at a rate of around 12. 2 Percent from the year2020to2027. India is actively participating in this arena. Facing competition, from China and the US well.
Advancements, in technology hold importance for the Indian economy as the farming sector plays a vital role in providing livelihoods for over 40 percent of the population and contributes significantly to the nations GDP (FY 2021). Despite its value of US $370 billion to Indias economy agriculture faces challenges due to weaknesses that impede its growth and efficiency levels. In order to address these challenges and enhance farmers’ incomes the agricultural sector in India needs modernization driven by technology and supported by reforms with agritech being anticipated to have a role, in this transformation.
India hosts, over 1 300 startups that use technologies like intelligence (AI) machine learning (ML) and the Internet of Things (IoT) aiming to boost efficiency and productivity in the sector.The growth of these startups has been significantly propelled by the COVID 19.Key areas such as Karnataka,Maharashtra and the Delhi National Capital Region(NCR)serving as centers for agritech startups, in the nation.
This article delves into the industry of India. Discusses how agritech companies interventions are enhancing efficiency and productivity while also opening up investment prospects, in the sector.
Contribution of the agriculture sector to India’s economy
The agricultural industry, in India includes farming (crops and horticulture) forestry; livestock (milk,eggs and meat); and fisheries.It ranks second globally after China. Contributes 11. 9 Percent to the agriculture gross value added (US $ 3320. 44 Billion) while also making up 12 percent of Indias export revenue.This sector also influences consumption patterns and production dynamics across agricultural sectors, like consumer goods retail, chemicals and e commerce.
Indias economy heavily relies on the industry for its growth and development potential because of its economic connections, with other sectors of the economy. This highlights the pressing requirement for implementing reforms, in this industry. Here are some of the issues that need to be addressed.
Fragmented and unorganized agribusiness ecosystem in India
The world of agribusiness involves all aspects of business operations, from the farm to the table. Includes every step along the way. From providing resources to producing and processing agricultural goods and delivering them to customers at the end of the line. This system has expanded to incorporate sectors like commerce and local markets due, to swift urban growth and a variety of dietary options and consumer trends that are constantly evolving alongside expanding food markets.
Despite the expansion observed in this industry sector as of late it is noteworthy that the structure is still quite chaotic and scattered marked by tiers of middlemen involved in the process. While it is true that a significant 86 percent of scale and farmers serve as the main providers of food and sustenance, in India they encounter obstacles such as owning minuscule plots of land measuring less than two hectares and facing restrictions in terms of technology, resources, financial support, funding opportunities and access, to markets.
Innovations, in technology have the capability to tackle these obstacles like infrastructure and inefficient supply chains that have long hindered the sector from achieving its maximum impact due, to limited digital adoption.
How agritech aids productivity and efficiency in India’s agriculture sector
Agritech refers to a network of companies and startups leveraging technological advancements to enhance yield, efficiency, and profitability for farmers throughout the agriculture value chain. Key segments within the agritech sector that contribute to this value chain include:
– Market Linkage – Farm Inputs: Digital marketplaces and physical infrastructure connecting farmers with agricultural inputs.
– Biotech: Research focused on plant and animal life sciences and genomics.
– Farming as a Service: Rental of farm equipment on a pay-per-use basis.
– Precision Agriculture and Farm Management: Utilization of geospatial data, weather information, IoT, sensors, and robotics to boost productivity, alongside farm management solutions for resource and field management.
– Farm Mechanization and Automation: Implementation of industrial automation through machinery, tools, and robots for seeding, material handling, harvesting, and other tasks.
– Farm Infrastructure: Technologies such as greenhouse systems, indoor and outdoor farming, drip irrigation, and environmental control systems like heating and ventilation.
– Quality Management and Traceability: Post-harvest handling, quality checks, produce monitoring, and traceability in storage and transportation.
– Supply Chain Tech and Output Market Linkage: Digital platforms and physical infrastructure for managing post-harvest supply chains and connecting farm outputs with customers.
– Financial Services: Credit facilities for input procurement, equipment, and insurance or reinsurance for crops.
– Advisory/Content: Online platforms providing agronomic advice, pricing, and market information.
Here are some ways to achieve this:
– Establishing strong input market linkages supported by a robust physical infrastructure can address issues related to input price volatility and sub-optimal input selection.
– Precision agriculture has the potential to increase yields by up to 30 percent.
– Digitizing farm management records can enhance operational efficiency and reduce costs.
– Implementing quality management and traceability measures can help farmers achieve higher-quality produce, motivating them to adopt modern practices.
– Improving output market linkages through an efficient post-harvest supply chain can reduce inefficiencies, such as high levels of farm produce waste, benefiting both farmers and consumers.
– Providing enhanced financial services could offer credit access to 30 percent of farmer households and crop insurance to 65 percent of them.
Business models in India’s agritech sector
Business models within the agritech sector can be categorized as follows:
- Margin-Based Model: This model applies to segments such as market linkage for farm inputs, supply chain technology, and output market linkage. Agritech companies in this category earn a margin by establishing marketplace connections either at the input or output stage and by delivering the promised services.
- Subscription-Based Model: Agritech firms involved in areas like precision agriculture, farm management, quality management, and traceability use this model. They provide a combination of hardware, software, and service solutions throughout the year and charge customers on a monthly or annual basis.
- Transaction-Based Model: Agritech companies offering financial services, such as loans or insurance policies, operate under this model. Their revenue is based on the number of transactions or policies processed.
Overview of agritech in India
During FY 2019-20, the agritech ecosystem experienced a significant revenue growth of around 85 percent. According to an Ernst & Young 2020 study, the potential of the Indian agritech market is estimated at US$24 billion by 2025, though only about one percent of this potential has been realized so far. Another Bain & Company study forecasts this potential at US$35 billion by 2025.
Additionally, a Bain & Company report released in March 2022 in collaboration with the Confederation of Indian Industry (CII) highlights that private equity investors have been targeting systemic issues within the agritech industry and its sustainable development. Private equity investments in agritech startups reached INR 66 billion between 2017 and 2020, growing at over 50 percent annually. This growth is supported by the rural microfinance sector, which expanded from INR 1.22 trillion in December 2019 to INR 1.46 trillion in March 2021, and agri-credit, which increased from INR 8 trillion in FY 2014-15 to INR 14 trillion in FY 2019-20.
The Bain-CII report also notes a rise in agritech startups providing technology-driven solutions, such as offtake marketplaces, storage and transportation services, and agronomy advisory. Meanwhile, established players are working to cut operational costs and manage scale through in-house solutions and new partnerships with emerging companies. Global tech giants like IBM and Microsoft are exploring innovative solutions for crop health monitoring and yield forecasting.
With increasing internet penetration in the country, especially in rural areas driving this growth, India is well-positioned to embrace evolving agricultural methodologies and shift from traditional business models to innovative agritech-driven models.
Budget 2022-23 provisions
During this year’s budget presentation, Finance Minister Nirmala Sitharaman revealed plans to create a new initiative in collaboration with the private sector to provide digital and high-tech services to farmers. This scheme aims to combine public sector research with private agritech innovations within the agricultural value chain. In her Budget 2022-23 address, Sitharaman stated that INR 600 million will be allocated for ‘digital agriculture’.
The government also plans to establish a fund with blended capital to support startups and rural enterprises that focus on enhancing the farm-produce value chain. Additionally, the finance minister highlighted the potential use of drone technologies in agriculture for tasks such as crop assessment, digitizing land records, and applying insecticides and nutrients.
Investing in India’s agritech space
The table below illustrates the consistent growth of investments in the Indian agritech sector, highlighting notable companies such as EM3, Cropin, Jumbotail, Ninjacart, DeHaat, AgroStar, Farmbee, Licious, and Zappfresh that have received significant funding.
Since 2015, investments in Indian agritech have increased significantly, with total investment reaching US$242 million by October 2020. In 2020, the meat delivery segment of agritech startups attracted the largest share of funding, totaling US$124 million, while startups involved in marketplace and e-distribution received US$83 million.
This shift in 2020 represents a significant change from 2019 trends, where marketplace and e-distribution startups received the majority of funding, amounting to US$203 million of the total US$257 million. In contrast, meat delivery startups only secured US$20 million in funding.
Growing segments within agritech in India
Out of the total projected agritech market potential of $24 billion, the supply chain technology and output markets segments in India stand out with the highest potential, valued at $12.1 billion. This is followed by financial services at $4.1 billion, precision agriculture and farm management at $3.4 billion, quality management and traceability at $3.0 billion, and market linkages for farm inputs at $1.5 billion.
Key companies in various agritech segments include:
– IoT-powered agriculture and drones: Fasa, Bitmantis, Agronxt, Soilsens
– Marketplace and e-distribution: DeHaat, Ninjacart, Jumbotail, Bijak, Farmzen
– Farm inputs: DeHaat, AgriBegri, AgroStar, BigHaat, Gramophone
– Precision agriculture and farm management: Cropin, FarmERP, AgNext, BharatAgri
– Farmer advisory: AgroStar, IFFCO Kisan, RML, Farmbee, Fasal Salah
– Finance and insurance: Aggois, Niruthi, Weather Risk, Jai Kisan
– Equipment leasing: EM3, Agri Bolo, Tractor Bazaar
– Meat delivery: Licious, Zappfresh, Pesca Fresh, Fresh to Home
– Crop quality assessment: Nebulaa, AgricX, Intello Labs
– Smart farm equipment: Drip Tech, Netafim, Cultyvate, Soilsens
– Hybrid seeds: Mahyco, Nu-genes, Nuziveedu Seeds
– Hydroponics: Fresco, Triton Foodworks, Junga Fresh and Green, Absolute Foods
Input Market Linkage and Farming-as-a-Service (FaaS)
This segment is rapidly growing in India, with key players like AgroStar and BigHaat providing missed-call-based services for ordering inputs and equipment, along with cash-on-delivery options. These companies have reduced the number of intermediaries by partnering directly with producers and also offer additional services such as on-demand machinery rental and pesticide spraying.
Supply Chain, Post-Harvest Management, and Output Market Linkage
This segment is the largest revenue contributor to the agritech industry as of FY 2020 and experienced the highest growth during the same period. It involves the collection, processing, storage, logistics, and distribution of agricultural produce. Agritech startups like Ninjacart, Waycool, and Samunnati are addressing issues related to inadequate rural infrastructure and supply chain traceability.
Precision Farming, Analytics, and Advisory
This segment saw a growth of approximately 17 percent in FY 2020. It focuses on addressing knowledge gaps in scientific farming methods through IoT sensors and geospatial technology. Startups in this space, such as Clover, Cropin, KhetiNext, and Zentron, provide data-driven insights and quality assessment solutions for large agribusinesses.
Agri Fintech
This segment includes agritech startups offering credit, insurance, warehouse receipt financing, and trade financing. With challenges like limited access to organized credit and collateral, agritech companies use technologies such as geo-tagging and remote monitoring to assess risk and offer loans at lower interest rates than unorganized lenders. This segment is still emerging in India, with about 20-40 startups, including payAgri, Jai Kisan, and Aggois.
