Despite India being a major agrarian economy contributing 19.9 percent to the GDP as per economic survey 2020-2021, the sector has been grappling with its outdated processes causing impediments to its growth. The agriculture sector is mired in inconsistencies such as fragmented landholding resulting in poor unit economics, lack of price transparency by middlemen resulting in selling crops lower than optimum price, fragmented supply chain, and poor procurement processes, inferior farm management practices, and manual handling of farming activity both pre-and post-harvest giving low yield and high-interest rate loans. To bridge the gap of inefficiencies prevailing in the agriculture sector, the past few years have witnessed the mushrooming of several agtech start-ups in the country. The agtech start-up leveraging the high-end technologies such as IoT (Internet of things), artificial intelligence, spectral analytics, and computer vision and innovative models of business are reducing the friction between farmers, input dealers, wholesalers, and retailers and removing the bottlenecks countered in pricing, interest rates, procurement, and farm production. Additionally, these agtech start-ups are also providing soil data-based crop and fertiliser recommendations for better crop yield giving profitability and luring investors in agtech.
India is a major agrarian economy contributing 19.9 percent to the GDP as per Economic survey 2020-2021
The Funding Trajectory of Agtech start-ups – 2019 to 2020
The agriculture sector has remained unattractive for entrepreneurs due to its structural challenges. Investors, were unconvinced to invest in agtech since the cloud of doubt always hovered around business scalability, monetisation, scope, and distribution.
But in the past few years, the agtech sector has been experiencing tailwinds that have piqued interest in investors. Factors such as affordable data costs, Jio networks penetrating deeper into the rural areas, use of smartphones, farmers getting comfortable with UPI -based payments, Government introducing farmer-friendly policies and initiatives such as PM-KISAN, PM-AASHA, PMSKY, etc is encouraging agripreneurs to foray into agtech.
In 2019, as per a report titled ‘Agritech in India -Emerging Trends in 2019’ by NASSCOM, India became home to 450 agtech start-ups. The agtech sector alone received total funding of more than $248 million funding within the first six months registering a growth of 300 percent growth as compared to funding received in H1 2018. The study also reveals that every ninth agtech start-up is originating from India which is resulting in an increase in average farmer’s income by 1.7 times. The farmers are encouraged to try new tech solutions for farming.
Amid farmers protests against the new farm laws and a crippled supply chain in the pandemic, the funding in the agtech sector in 2020 rose from $45.8 million in 2016 to $430.6 million that is a 9.4 growth as per a recent study by Accel-Omnivore. Investors Aavishkaar, Accel, Ankur Capital, Beenext, and Omnivore are regular investors in the sector. 2020 has also seen new investors Blume, Nexus, Sequoia, Tiger Global, and RTP joining the investor bandwagon in agtech.
What is attracting the investors in Agtech?
As per a study from IBEF (Indian Brand Equity Foundation), the agtech sector is poised to grow by 25 percent y-0-y and is estimated to attract $500 million in the coming years. The government has been a catalyst in the growth of agtech sector. Its initiative National Centre for Management and Agricultural Extension in Hyderabad (MANAGE) in collaboration with the Department of Science and Technology, GOI, has organised a food and agri-business accelerator in association with a-IDEA, TBI of NAARM. The programme acts as an incubator for the agtech start-ups by providing mentoring, industry network, and investor pitching guidance. Under the initiative, Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) government has allotted Rs. 56,340 crores (US$ 7.64 billion) for investing in end-to-end solutions on source creation, distribution, management, field application, and extension activities, which will be boosting the growth of agtech start-ups, at the same time lucrative opportunity for the investors.