The Next Decade of Indian Agritech
Emerging trends and opportunities in agrifoodtech in India
We are living through an inflection point in India’s agricultural technology (agritech) sector. From less than 50 companies in 2013, India is now home to more than 1,000 agritech startups working to transform the sector. This is also reflected in the investment landscape, where capital inflows into the sector between 2010 and 2019 stood at $1.9 billion, of which $1.7 billion came between 2014 and 2019. The COVID pandemic has actually accelerated the adoption of agritech by Indian farmers and agribusiness intermediaries, shifting them from informal markets to the digital ecosystem. When traditional markets fell apart during the lockdowns, farmers, traders, and rural retailers turned to agritech startups for solutions. Not only did they receive critical support, but they also experienced a better way of doing business long term. It is certainly an exciting time to be in this dynamic sector, as it holds tremendous opportunities in coming years.
Why invest in agritech?
Ten years ago, the sector was little more than a twinkle in the sky. Investing in agritech was considered lunacy. Then, in 2015, the business-to-consumer (B2C) startup sector glutted itself with funding and competing business models. Investors refocused on business-to-business (B2B) opportunities, especially those related to small and medium enterprises (SMEs), and agritech came under the scanner. Initially, most of the VC investments in agritech were focused on farm-to-consumer brands, B2B agri marketplaces, and rural fintech for farmers.
In the last few years, rapid advancement in underlying technologies like mobile internet and rural smartphone penetration have provided the digital backbone to scale both business-to-farmer (B2F) and business-to-business-to-farmer (B2B2F) models. An increasing number of farmers are now able to use digital platforms to improve their yields, lower their operating costs, and ensure their produce gets the right market value. These trends have helped catalyze a supportive agritech ecosystem with participation from accelerators, strategic corporates, and VCs at every stage.
In 2020 we explored what agritech will look like in a decade. Our report Future of Indian Agriculture & Food Systems: Vision 2030 details our findings, their implications, likely scenarios, and a bold vision for the sector. Here, drawing from our detailed work, we have analysed emerging areas among agritech innovations and the factors supporting them.
A growing digital ecosystem
Smallholder farmers are critically important for the global food supply and India is home to 130 million of them. Increasingly, we are seeing startups focused on solving challenges faced by this segment, including farmer profitability, resilience, and sustainability. B2B agri marketplaces and farmer platforms are two clear areas where we can expect to see more growth and innovation in the next few years.
B2B agri marketplaces existed alongside traditional systems in the pre-pandemic years. Then, as the lockdowns froze the latter, farmers, traders, and retailers adapted to the situation and switched to digital platforms from the safety of their homes. This was greatly aided by the advent of low-cost data solutions in the country boosting smartphone penetration in rural India. In the coming years, we will see more digital marketplaces across various agricultural sub-sectors including khet-to-kirana, agri-inputs, and even the sale of livestock.
Startups working on full-stack farmer platforms are bringing together agronomy services, input supply, fintech solutions, and market linkages under the same umbrella. This is helping develop multidimensional engagement with farmers, which in turn creates rich data to improve the predictive powers of machine learning models.
Government support in this behemoth sector plays an important role in ushering in capital. This year, the Union Budget 2021 steered our attention to the white spaces in Indian agriculture that require interventions. The government announced increased credit flows to animal husbandry, dairy, and fisheries, including building modern fishing harbors and fish landing centers. While the budget highlighted only three sub-sectors of agriculture, it underlined the importance of looking beyond horticulture and cereals.
Consolidation of fragmented landholdings has been a challenging area for the government. However, it is what the future holds for achieving economies of scale for smallholders. Between 2010 and 2020, India built its foundational digital identity via the India Stack. The next ten years will focus on building upon that to create a robust AgriStack with a multi-layered agricultural information system. This will be one of the most impactful interventions in the future that will catalyze the overall efficacy of other innovations in agriculture.
The pandemic has sharply driven up the consumer demand for traceable and nutritious produce. This has led to an increase in demand for “farm-to-consumer” (F2C) brands that can assure quality and provide legitimate traceability back to the source. Lockdowns have proven to be a strong catalyst as more people are shifting to online ordering. This has created ample scope for F2C brands to disrupt traditional distribution channels.
Managing the impact of climate change
Agriculture is one of the main perpetrators of climate change and also deeply suffers from its ill effects. Degradation of soil fertility, depleting water tables, increased risk of pests, and pathogens from monocropping, are only a few of the dire challenges farmers are grappling with. However, we are witnessing a steady rise of startups with sustainability at the core of their business.
Affordable precision farming technologies will play a pivotal role in building sustainability in agriculture. Farmers can reap the benefits of actionable insights from rich data on weather, nutrients, moisture, and crop health. This will take the guesswork out of farming and ensure optimal use of resources, including the reduction of agrochemicals and water.
Farm automation for smallholder farmers, albeit a nascent area, for now, will grow steadily. Autonomous and semi-autonomous farm robotics will solve the problem of dwindling labor force, helping to lower the resource footprint for farmers and reduce the overall drudgery of farm work.
By 2025 Indian will need to produce an estimated 300 million tons of food to feed its population which would require a whopping 45 million tons of fertilizer! Fortunately, collective efforts by various stakeholders in climate change management are paving the way to create resilient, high yielding varieties of crops while significantly reducing input requirements.
Finally, as we are moving to a more animal protein-intensive future, the aim will be to do so with humaneness and environmental sustainability in mind. To achieve that we will be seeing more interventions in animal breeding, sustainable smart feed and care, and developments in alternative proteins.
Feeding 10 billion
The narrative of Indian farmers desiring a better life for their progeny away from agriculture needs to be altered. For that to happen, agriculture must become a steady and profitable trade for India’s 130 million farmers and their families. Agritech entrepreneurs will be part of that solution, leveraging innovation, technology, and persistence to reinvent agriculture and food systems.