Agriculture Technology: Changing the Outlook of Indian Agriculture

Agriculture is the backbone of the Indian economy, the industry accounts for 17% of GDP. It employs over 43% of the workers in India. Furthermore, agricultural production accounts for around 12% of overall exports. Agricultural technology has transformed the way agriculture has been done in previous years. The sector is expanding as a result of the massive increase in the use of mobile and the internet at the grassroots level. In 2019, total investment across sectors was $3.5 billion, with agriculture accounting for 16% of that total or $563 million spread across 58 transactions. Total investment across industries in 2020 is expected to be $2.6 billion. Despite the coronavirus pandemic, the agriculture sector got $440 million in 52 deals in 2020, accounting for 17 percent of overall investment, a 1% increase over 2019. There are about 600-700 agritech startups in India, with the majority of them have emerged in the last five years.

Challenges faced in the Indian Agriculture 

The Indian agri-business faces a lot of headwinds and challenges which need to be taken care of. Even though agriculture employs around 43% of the workforce, it contributes only 16% to GDP as of 2019. This is because of the lower productivity of Indian farms and farmers. The Indian agriculture sector is highly fragmented and unstructured, with numerous intermediaries and middlemen, resulting in supply delays and escalations. Poor storage and processing facilities, as well as an inefficient supply chain, resulting in food waste and post-harvest loss.

We find small farm holdings in India on a large scale, which makes it difficult for farmers to use technology and large machines. For one, small and marginal farmers cannot afford it. Second, on small farms, technology and huge machines are difficult to operate. As a result, production and efficiency suffer. These small and marginal farmers go to moneylenders to borrow money for farm equipment and other investments, and they have to pay a higher interest rate than the market, thus they are always locked in a debt cycle.

They mostly rely on informal credit sources rather than the formal banking system. Farmers experience challenges obtaining crop insurance due to a lack of a solid legitimate financial ecosystem. The government has created crop insurance systems to safeguard farmers from crop failure, but more than 60% of farmers are ignorant of these programmes. Farmers who are uneducated or illiterate are oblivious to the usage of various machinery and the number of fertilisers to be employed, and this inefficient use might harm soil quality. Other issues in Indian agriculture include a lack of digital infrastructure and a low level of digital adoption.

How Agritech startups are striving to solve these challenges?

Challenges in any sector also bring opportunities to overcome these challenges. To overcome the aforementioned problems, data is collected on the soil quality, weather, use of fertilisers, etc with the help of IoT sensor devices, GPS enabled equipment, imaging and artificial intelligence and this data is used for better farm management and precision farming. 

With this data and real-time data analytics, companies can assist farmers in making better decisions about which crops to produce in which season, as well as creating weather predictions and crop yield forecasting. Startups provide personalised notifications/alerts and dashboards on their mobile phone application to help users make informed decisions. This will allow for real-time forecasting and crop protection by lowering the isk.

Some agritech businesses are also attempting to improve market linkage, which involves connecting farmers to input markets and acting as the sole intermediary so that farmers can access higher-quality inputs. Digital infrastructure is utilised to increase supply chain efficiency and handle any problems that may develop when delivering agricultural products to markets or consumers. This allows for prompt delivery and eliminates post-harvest loss, which is otherwise significant in traditional supply chain systems due to a lack of suitable storage and warehousing facilities. There are also other e-market platforms built by entrepreneurs where farmers can sell their farm produce directly. These digital platforms designed to increase forward and backward market linkages and supply chain efficiency assist farmers in obtaining a higher price for their produce, which would otherwise be lost due to the involvement of numerous middlemen.  

Various startups work to provide credit facilities to farmers to make investments in machinery, technology, farm equipment, etc and also provide crop insurance in case of crop failure occurring due to disasters or untimely or uneven rains. Some mobile applications provide information to farmers on various agronomic practices, market pricing of inputs and outputs, which keeps farmers well informed about the current trends. The farming as a service model can be used to provide farm equipment to farmers on a rent basis, that is, pay per use principle. This will help small and marginal farmers who cannot make a huge investment in this equipment but they can use it by getting them on rent, thereby increasing their farm productivity.    

Various agritech startups have come up and work in different segments of the agriculture sector- like food processing, farm management and precision farming, Agri inputs and advisory, storage and warehousing, market linkage and supply chain management, farm equipment, e-commerce platform, financial services. These startups are using technology to find the solution to various challenges arising in Indian agriculture. The need is to increase the internet penetration and mobile penetration among Indian farmers so that they can avail the benefits that various startups are trying to provide.  

Ninjacart, CroFarm, DeHaat, Waycool are some agritech startups in the farm to fork market linkage and supply chain systems. Bharat Agri, Intellolabs, CropIn are some startups providing accurate data and information on farmland, fertilizers, crops on a real-time basis using satellite imagery and artificial intelligence. Some players in the precision farming and farm management segment are DeHaat, BigHaat, Stellapps, CropIn, etc. When it comes to financial services, Samunnati, Bijak, Farmart, Gramcover are some of the key players. KisanHub is one online information platform that provides information on various agronomic practices and market pricing. Goldfarm, EM3 Agri Services are the startups working on farming as a service model. There are so many startups other than the ones mentioned. 

Investment in the Agritech Startups

In the last five years, investment in the agritech industry has increased significantly. In 2015, the investment was around $20Mn which increased to $257Mn in 2019 and $242Mn in 2020. (Source: Praxis Global Alliance report, November 2020) Some of the active investors are Accel, Tiger Global, BlackRock, Omnivore, Viking, Coventure, Blume, Alteria Capital, Saama Capital, etc. Startups working on market linkages and supply chain efficiencies have got the maximum capital. Venture Capital firms are very active and on a rise in the agritech sector.

Conclusion

The Agritech sector has grown significantly in the past few years and will continue to do so. It is expected that the investment will go up to $500 million in the next two years. The use of technology and the farmers adopting digital products will help to achieve this number soon and enhance the growth even further. Traditional agricultural practices need to be replaced by new efficient, effective, and environmentally friendly technologies which will increase productivity and thereby help in doubling farmers’ income which is one of the main goals. 

References

Maple Capital Advisors Report, ‘India- Agritech Investment trends initiating coverage’, July 2020  

Praxis Global Alliance Report, ‘Overview of the AgriTech Sector in India’, November 2020 

McKinsey Global Institute Report, ‘Digital India Technology to transform a connected nation’, March 2019 

EY Report, ‘Agritech- Towards transforming Indian Agriculture’, August 2020

IIC Report, ‘2020 in Retrospect: India Impact Investment Trends’, 2020

Ministry of Agriculture and Farmers Welfare, Government of India background paper ‘Promoting Startups in Agriculture’.