The Big Bet: Nation’s Agriculture Prowess
Agritech has emerged as a sunrise sector. Nearly 100 agritech startups raised close to $1.33 billion across 139 deals between January 2020 and June 2022, according to Entrackr's data tracking platform Fintrackr. Industry experts believe that this number only accounts for about one per cent of the potential market opportunity.
With technology as a major driver, the agriculture segment isn’t far behind. A Ken Research report estimated that the Indian agritech market was expected to grow at a CAGR of 32 per cent from FY20 to FY25.
While the penetration of these solutions remains low, the sector seems to be on the right track. In the next few years, it will be an entrancing phenomenon to see how agritech increases penetration and brings innovative solutions to the very deep pockets of India.
Rise In Investment
For the new-gen entrepreneurs, agriculture was unattractive due to its inherent structural challenges. In terms of investments, though most VCs appreciated the sheer size of the market opportunity, they were never confident about its scalability, monetisation, or distribution.
However, things are beginning to change. The sector has enjoyed some strong tailwinds over the past few years, which has sparked VC interest. As per the report by Bain and Company, the agri-tech market is expected to grow to $30-35 billion by 2025 as a result of favourable initiatives.
“There is now unanimity in accepting the fact that agricultural sustainability is indispensable for confronting food insecurity challenges. And it becomes absolutely
important to develop farmer-centric solutions for ensuring agricultural sustainability. This is why we have observed a huge influx of funding,” Navneet Ravikar, Chairman and MD, Leads Connect Services.
Shardul Sheth, Co-founder and CEO, AgroStar elaborates and said that investors in agritech can be compared to investors in microfinance institutions, where initial capital came from impact funds and social grants, as the sector matured, mainstream VC and PE dollars began to enter. It appears that the agritech sector has reached a tipping point where VCs are gaining significant momentum.
Deeper Governance
For technology-led growth in agriculture to continue, the government can fuel agritech startups in various ways. Although the government is encouraging rural digital transformation and increasing farmer credit, there are significant operational and ground issues encountered by agritech companies that demand government intervention.
“Bringing in reforms as per changing times is extremely crucial to give a boost to the momentum received to agriculture through agritech interventions,” laments AgroStar’s Shardul Sheth.
Below-given are the key areas that need attention-
1. Government should develop an open platform/forum for private companies to present their R&D-backed agritech solutions. “Dedicated research & development fund pool for private agritech organisation is now an absolute necessity” Leads Connect’s MD, Navneet Ravikar said.
2. It is now indispensable to recognise the impact of climate change on agriculture and the economy. Policies for making a climate resilient economy and keeping agriculture on priority should be launched.
3. There is a requirement for crop loss assessment agritechs for quick claim assessment and judicious settlement of crop loss claims under Pradhan Mantri Fasal Bima Yojana (PMFBY).
Building Agritech India
The agritech sector has been growing steadily since digital transformations have gained the trust of investors. Within agritech, there are segments with high growth potential. These include e-commerce, smart farm equipment, AI/Image-based crop quality assessment, precision agriculture, insurance and farming advisory services and more.
In a such as India, there are thousands of crop varieties, different climatic zones, soil conditions and varied farming practices, bringing all of that together under the digital umbrella is a herculean task. New-age agritech disruptive solutions are an answer to multiple unidentified and large-scale complexities.
Roadblocks
The lack of a solid connectivity infrastructure is one of the biggest concerns in developing countries. A large set of farmers did not have access to smartphones, lack of awareness among the farming community and legacy practices are the other key issues to address. Lower digital literacy at the grassroots level and the complex nature of the agricultural ecosystem is the biggest roadblock for solution providers.
“As the pioneer in the Agritech space, we have faced countless challenges in our journey. today when I look back, Cropin has digitised over 16 million acres of farmland and enriched the lives of nearly 7 million farmers while building intelligence for close to 500 crops and over 10,000 crop varieties in over 56 countries,” claims Krishna Kumar, Co-founder and CEO, Cropin.
Agritech In Next Five Years
According to a recent report by PwC, the agri-input and output market is worth over $350 billion, which presents a larger disruption opportunity. There has been a significant increase in funding for the space, indicating investor confidence.
India is an agrarian economy and agritech is transforming the labour-intensive sector into an insight-intensive sector. “The Central Government is doing a great job with various policies to encourage agritech adoption. However, availability of rural credit should be made simpler, farm and fertilizer subsidies should be made available to agritech companies,” explains Amith Agarwal, Co-founder and CEO, AgriBazaar.
“When we started in 2016, there were hardly any investors looking into agriculture. Now, mainstream VCs are doing $100mn+ deals. We should see a few unicorns in Agritech within the next 1-2 years. Tauseef Khan, Co-founder and CEO, Gramophone.
Over the next few years, agriculture will continue to emphasise sustainability, mitigation and resilience, given that it is a key emitter as well as a resource user. Digital-first agritech organisations ushering in a new growth wave are capturing an immense amount of farmer data to understand a lot about their patterns using AI, blockchain, IoT, SaaS and ML algorithms.
