Will Innovation Be The Growth Strategy for Indian Agri-Tech Start-ups?

The agri-tech companies are driving efficiency in the sector through technologies such as data digitisation and data platforms, data analytics, AI, IoT, ML and SaaS


The agriculture sector is the backbone of India and it holds a great responsibility of feeding over 1.3 billion population. Agriculture is also an integral part of internal and external trade. It has been positioning the country as a significant agri-exporter, with the sector contributing 12 per cent to India’s exports. Despite the recent outbreak due to the coronavirus and lockdowns crisis, the sector remained operational for every single day when most of the big manufacturing and other corporates were forced to put their shutters down.

The agriculture industry has radically transformed over the past 50 years. The traditional way of working from the past many decades had pushed the sector in the back burner. Some of the reasons for this backlog is low landholding, lack of modern technology and high-interest rate loans from the informal lending sector. The country has been taking agricultural self-sufficiency since its independence. While achieving food sufficiency in production, India still faces concerns of resource-intensive agriculture and low farmer productivity, which is resulting in poverty and undernourishment.

On the other hand, agriculture employs around half of the country’s workforce and uses three-fourth of the country’s fresh water resources. Despite all these efforts, it contributes only one-sixth of the GDP (gross domestic products). This indicates a low worker productivity and an inefficient use of resources in the agricultural sector in India. This is also due to the fact that a majority of agricultural production comes from small family farmers and stock breeders, who mostly do not have the capacity or necessary technological support to improve farm efficiency.

Connecting The Dots

But now technology is revolutionising the term agriculture to agritech, a combination of agriculture and technology. These issues are now getting addressed with the use of technology and innovative models of underwriting loans. Technology is the enabler that is now steering the Indian farming towards an inclusive and sustainable farming to meet the agricultural requirements of the future. In the past, numerous efforts have been made to make the agriculture sector adopt and implement technology. However, an impactful difference has become visible now in the past 6-8 years. This is mostly driven by the mobile revolution, which is actually empowering the farmers to connect with the rest of India.

On the same side, start-ups and entrepreneurs in the country have also played a vital role in this agritech revolution. New technologies like artificial intelligence (AI), farm and data analytics, aerial image-based analytics etc. are being introduced by agritech companies in India. This is making the farming processes more resourceful and leading its way in better decisions for improving yield and productivity.

Advances in machinery have expanded the scale, speed, and productivity of farm equipment, taking a lead in more efficient cultivation of more land. Seed, irrigation and fertilisers also have vastly improved, helping farmers to increase yields. Now, agriculture is in the early days of yet another revolution, at the heart of which lies data and connectivity. Artificial intelligence, analytics, connected sensors and other emerging technologies could further intensify yields, improve the efficiency of water and other inputs. Similarly, it can build sustainability and resilience across crop cultivation and animal husbandry.

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The traditional way of working from past many decades had pushed the sector in the back burner. Some of the reasons for this backlog is low landholding, lack of modern technology and high-interest rate loans from the informal lending sector.

The disruption was created in the traditional supply chains due to the pandemic-led lockdowns. During this period of lockdowns and coronavirus, a group of agritech startups came forward with innovative ways and lent their hands to farmers in connecting with buyers. They not only saved their crops and harvest from complete loss but also helped farmers in building automated supply chains. The agritech startups are gaining farmers’ confidence by structuring the next layer of data analytics in order to drive efficiency through the application of technologies. These technologies include data digitisation and data platforms, data analytics, artificial intelligence, internet of things, machine learning and software as a service.

Making A Difference

The country’s mushrooming start-up ecosystem has been actively playing its part in disrupting the agriculture sector. Agritech start-ups are operating in an attractive market with an estimated potential of US$24 billion by 2025, according to an EY report. Last year despite the pandemic, investors pumped in more than US$500 million into agritech deals, as compared to US$248 million in the previous year. In the past five years, the country’s agritech startups have been burgeoning in this space like never before, building farmer platforms, B2B agri marketplaces, rural fintech enterprises, farm-to-fork brands, among others. The country has more than 600 agri start-ups endeavouring to solve challenges in the agri value chain.

In spite of this robust investment activity in the past few years, the market penetration in the agriculture sector is still very negligible. It accounts for merely 1 per cent of the potential market opportunity of US$24 billion. However, it is expected that the untapped market potential and opportunities in the agritech ecosystem will continue to grow and pick-up pace over the next decade.

As the agritech ecosystem evolves further, there are a few other potential scenarios that could play out in the sector. There is an opportunity for players to expand vistas across the agritech segments to develop the end-to-end relationship with the farmer. There is also an opportunity for some of the large retailers and e-commerce companies to expand their grocery presence through backward integration into the agritech space. And through this, food processing companies could also obtain agritech companies to keep a tight check on their quality and operations.

Going ahead, we could witness a surge in penetration of segments such as financial services, precision agriculture and farm management and quality management and traceability. Also, it should be considered the tremendous market potential that these segments offer and the degree of investment funding these segments have witnessed. Agritech startups need to develop scalable business models with higher unit economics. And this should be done through enabling instead of displacing traditional value chain participants to succeed in these segments.

Adoption Is The Key

Business models in the agritech space are still budding. Revenue models could differ from margin-based to subscription-based to transaction-based depending on the segment addressed by the agritech player. The pressure on accomplishing higher unit economics emerges on agritech start-ups. And there is a change of witnessing a horizontal expansion of companies into platform-based play, where these firms can own the end-to-end relationship with the farmer.

Further, there could be a possibility of alliance in the industry as larger players have started to acquire regional players to achieve leverage in market linkages. Attractive market opportunity, nascency in investment funding and miniscule penetration by incumbent agritech players offer an opportunity for established players such as institutional retailers, e-commerce players and food processing companies. They are helping them to create impact at a larger scale. And large scale transformation of agriculture through agritech requires investment funding at scale along with patient capital.

Let’s see how innovation be the growth strategy for Indian Agritech startups.

Modernisation in Agritech Startups

Modernisation in agriculture technology (agritech) offers accurate solutions for sustainable farming, which includes indoor vertical farming, hydroponic farming, and modern greenhouse practices. Adopting these practices are set to redesign the farming experience with innumerable benefits. They produce healthier, fresh, and more nutritious food that has a longer shelf life. Similarly, these practices will help in saving valuable water, land, and labour resources. Furthermore, the controlled growing system enables farmers to produce food free from harmful chemicals and residue.

Complementing Consumer Preferences

With the changing times, consumption patterns are also changing. People are becoming more alert and aware of whatever they are eating. Eating healthy and fresh is becoming a habit now. Besides, the Covid-19 pandemic has also forced consumers to change their dietary habits and consume food that helps them in preventing infections and building strong immunity against the infections. The techniques of ultra-modern tech farming are optimising crop production and quality, at the same time offering food safety all year round. Through these modern techniques, farming, farmers are grown in nutrient-rich water pesticides, harvested a few hours before it reaches the customer’s plate. This has strengthened the power of making good choices and brought in a behavioural change to create a healthier food system.

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Agritech startups need to develop scalable business models with higher unit economics. And this should be done through enabling instead of displacing traditional value chain participants to succeed in these segments.

Smart Farming Model

The growth in the adoption of advanced technology solutions in agriculture is revolutionising the sector in a big way. By using the smart farming model, traditional farming is steadily transitioning to urban modern tech farming. The farming model is allowing production differently using new techniques that are surging food production and efficiencies in the food supply chain. This is done through integrating automated technologies and processes. Now, it is becoming easier to meet the growing demand of the population. Here are some of the smart farming ideas that can be adopted easily.

Indoor Vertical Farming

Indoor vertical farming is the procedure of growing plants in closed and controlled environments. With this method, plants mounted vertically, and it takes less land space to grow compared to traditional farming. Vertical farms don’t require soil for plants to grow, and in this method, the labour force is reduced too. It is the best and the first smart farming technique in India.

Farm Automation

Farm automation is the up gradation in farming machines and equipment. To accomplish this, companies are working on this. They are working on autonomous tractors, automatic watering, develop drones, robotics innovation, and seeding robots. The companies not only provide quality innovative machinery but make these machines affordable for the farmers.

Livestock Farming Technology

Livestock provides much needed products, and in India, livestock is the most neglected part of farming. New innovations created huge changes and improvements to the industry. It is helping in managing and tracking livestock easily and comfortably. These technologies come in genetics, nutritional technologies, digital technology, and more.

Modern Greenhouses

Indian agriculture witnessed an increase in the greenhouse in large scale. However, it is urban centred and capital infused. As the market demand surges significantly, the trend of the greenhouse is growing in recent years. A modern greenhouse is now becoming automated control systems, tech-heavy and using LED lights for growing environment.

Precision Agriculture

The latest precision agriculture companies are introducing technologies that permit Indian farmers to boost production. It is done through controlling pest stress, micro-climates, moisture levels, and soil conditions. In this, farmers get appropriate techniques for growing crops and planting that enhance efficiency and income.

Blockchain

Blockchain used to resolve important issues, including food traceability, supply chain inefficiency, safety recalls, and food fraud in the food system. It creates a market for premium products with verification and transparency. This verifies transactions that are securely shared with every seller. It helps in creating transparency in the marketplace and food supply.

Preeti Verma
Preeti Verma
An alumna of IIMC, Preeti writes on global and domestic business, life cycle of a business and its stages. Her fourteen years of stint includes The Economic Times, Business Standard, Financial Express, Tehelka, Businessworld and Times Internet.

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