- The agritech sector has witnessed significant expansion in the last decade, with the number of startups increasing from around 50 to 6,224 over the period, accompanied by investments.
- Despite environmental concerns and fragmented landholdings, the agritech segment is poised to address inefficiencies, improve productivity and create jobs in the agricultural sector.
- Currently, the agritech sector, however, has limited penetration and a slowdown in funding over the past year.
Government initiatives over the past decade are accelerating the use of technology and innovation in the agriculture sector, with significant funding and potential job creation, despite challenges such as limited penetration, geographical concentration and environmental concerns.
In her recent budget presentation on February 1, Finance Minister Nirmala Sitharaman outlined a comprehensive list of government initiatives aimed at societal welfare, notably for the “annadata” (farmer) and also underscored the government’s commitment to innovation and startups.
Over its past two terms, the incumbent government has been pushing for agritech solutions to revolutionise the agricultural sector. The government launched the Startup India initiative in 2016. More recently, in 2023, an agriculture accelerator fund to encourage agritech startups by young entrepreneurs in rural areas was announced in the budget speech.
Meanwhile, the number of agriculture and related startups too have grown. There were about 50 startups in the agriculture and allied sectors in 2014-15. In December 2023, the government data presented in the Parliament shows 6,224 agriculture startups in the country.
Agritech, short for agricultural technology, refers to the utilisation of advanced technology and innovations in agriculture to improve and optimise various facets of farming. To qualify as a startup, an entity must be within its first 10 years from the date of incorporation, with a turnover not exceeding Rs. 1000 million in any financial year since its inception.
Funder interest
A 2023 report by the Indian Council for Research on International Economic Relations (ICRIER) identifies verticals with agritech presence, including farm and data analytics, infrastructure, information platforms, finance and supply chain. The report highlights that agritech startups received funding of $545 million from venture capitalists between 2014 and 2019, indicating a strong interest in funding support for the sector. The COVID-19 pandemic, too, created new opportunities. In the financial year 2021-22, the agritech segment secured a total funding of $1604 million, four times more than the investment received in FY 2020-21.
Experts that Mongabay India spoke to are optimistic about the potential of agritech in India’s farming sector.
Rishi Agarwal, Managing Director of FSG, a global non-profit consulting firm that has been studying funding trends in agritech startups, says that the sector has started to mature with several startups closing in on the “unicorn” status, which indicates a valuation exceeding $1 billion, and a couple of them likely to achieve it within the next two to three years. “However, that also means that startups need to move beyond the ‘obvious’ innovations (reducing the number of intermediaries and providing online platforms to sell the produce) and explore crop-specific innovations that add value to farm produce,” he adds.
According to Hemendra Mathur, venture partner at the early-stage venture fund Bharat Innovation Fund, there is a scope for 10,000 agritech startups by 2030 in India. These in turn have the potential to create 10 million jobs in rural areas.
Inefficiencies in supply chain
In the past few days, India’s capital New Delhi is witnessing another protest by farmers from Punjab and Haryana, similar to the 2021 agitation, demanding minimum support price (MSP) for their produce from the government. Experts say that environmental issues are a key but quiet reason for the agrarian distress, along with other challenges such as small-holdings, dependence on rain for irrigation and yields that are 35-50% lower than global standards.
Ashok Gulati, an agricultural economist and professor at the Indian Council for Research on International Economic Relations (ICRIER) and one of the co-authors on the ICRIER report on the emerging agritech ecosystem, underscores the significant role of climate change in exacerbating vulnerabilities in agriculture. Research supports this assertion, highlighting that even a one-degree temperature increase can detrimentally affect approximately five million tonnes of wheat production. Gulati emphasises the need for substantial investments in research and development.
Despite having the second-largest arable land in the world and a substantial number of cultivators (146 million), the majority (86%) are smallholders, cultivating less than two hectares of land. Moreover, a significant number of landless farmers lease small parcels of land for farming, says Yugank Bhardwaj, Director and Agtech Leader, PricewaterhouseCoopers International Limited (PwC), a global accounting firm. These factors, explains Bhardwaj, limit the scope due to the scale, as small farmland yields low output, hindering market access. According to him, restricted participation in market channels and limited access to market information further impede the adoption of new knowledge and techniques, perpetuating archaic practices. Consequently, the sector suffers from inefficiencies throughout the supply chain, from seed to market delivery.
The Economic Survey, 2022-23 underlines the challenges of the agriculture sector, noting, “The sector needs re-orientation in the backdrop of certain challenges like adverse impacts of climate change, fragmented landholdings, sub-optimal farm mechanisation, low productivity, disguised unemployment, rising input costs, etc.” Furthermore, food security is potentially compromised by the country’s burgeoning population which is estimated to reach 1.67 billion by 2050.
According to Bhardwaj, addressing inefficiencies in the agricultural sector is crucial for food and national security as the sector contributes 16% to the overall GDP and sustains about 52% of the Indian workforce. Agritech startups see an opportunity in these inefficiencies while creating a profitable business model. They envision a win-win situation for farmers and the agricultural sector as a whole, he adds.
Some challenges while potential remains
Despite the apparent growth of the agritech sector, its current penetration is still low at 1.5%. After a surge in 2022, investments declined in 2023. “Between FY22 and FY23, investments in Indian agri-tech fell by a staggering 45%,” a report published by FSG in September 2023 says. Lead author Agarwal attributes the decline to global factors, such as an increase in global interest rates. He, however, anticipates the next surge of investments to be when startups develop innovative solutions that enhance the value, primarily the quality, of agricultural produce.
A majority of the startups in this sector in India are registered in Karnataka and Maharashtra, notes the ICRIER report. Agrawal adds that the current startup ecosystem, in general, is concentrated in Mumbai (Maharashtra), Bengaluru (Karnataka) and Delhi.
In the past decade, over 80 private startups across sectors in India have achieved unicorn status, with a valuation of over one billion. However, agriculture startups specifically have somewhat remained in the shadows, as noted in a National Academy of Agricultural Sciences policy paper. The paper also raises concerns that despite India having approximately 75 agricultural universities producing over 45,000 students annually, most high-growth agri-startups are founded by young professionals with engineering and management backgrounds.
The government is using digital technology to spur innovation in the agriculture sector with initiatives such as the Agristack initiative that has been under development since 2020 and aims to integrate various digital components across the agricultural value chain including farmer registry, geo-referencing of village map registry and crop sown registry by the states/UTs, to provide real-time and accurate information on farmlands. The Ministry of Agriculture (MoA) is also working on finalising the India Digital Ecosystem of Agriculture (IDEA), a framework that outlines the structure for developing the Agristack initiative. It has signed Memoranda of Understanding (MoU) with major corporations, including Microsoft Corporation (India) Private Limited, Amazon Internet Services Private Limited, ITC Limited, Jio Platforms Limited and others to develop Proof of Concepts (PoCs) to validate the feasibility, functionality and potential success of the project. They are expected to run pilot projects in selected districts.
The Agristack initiative, however, has raised concerns about data privacy, user rights, data localisation, among others. The Minister of Agriculture and Farmer Welfare Arjun Munda responded to these concerns in Parliament recently, stating that Agristack operates on a federal structure and the ownership of data stays with the respective states and that personal data can only be shared with the data seekers with farmers’ consent.
Bhardwaj of PwC, lauds the initiative, likening it to the transformative impact of the Unified Payments Interface (UPI) on the digital payment ecosystem in India. He anticipates that data aggregation will enhance planning, leading to new business models and an improved ecosystem, reducing inefficiencies and ensuring better price realisation for farm produce.
With additional inputs from Priyanka Shankar.
Banner image: Despite having the second-largest cultivated area and a substantial number of cultivators (146 million), the majority (86%) are smallholders, cultivating less than two hectares of land. Photo by Nila Racigan/Pexels.
