India has always been, and continues to be a primarily agrarian economy, boasting a population of 140 Mn farmers. In fact, agriculture and allied sectors like fisheries and forestry combined, contributed ~18% to the GDP (Gross Domestic Product) as of 2020, providing livelihood for close to 60% of India’s population. However, to better meet consumer demands, improve the effectiveness, efficiency, and sustainability of existing policies and programs, design better ones, and achieve resiliency — India is fast moving towards digitalization which involves the implementation of advanced digital technologies such as Data Analytics, Blockchain, Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IOT), and more. Thus born, at the confluence of traditional agricultural methods and modern technologies, is Agritech.
What do these advancements mean for the agriculture sector in India?
In an attempt to understand the nation’s Agritech landscape, Zinnov studied India’s agricultural ecosystem with the objective of gaining better perspectives on the nation’s technology focus, initiatives, start-up outlook, challenges faced so far, and government policies.
India’s digital story so far
India’s digital ecosystem is witnessing healthy tailwinds such as affordability and availability of high-speed internet, a maturing digital content ecosystem. What this has brought in its wake is an exciting opportunity for innovation in the agricultural ecosystem, where market players can make best use of next generation technology such as data digitalization and data platforms, data analytics, AI, ML, IoT, and Software as a Service (SaaS) to their advantage.
Agritech: A critical tool to address sticky challenges
An average Indian farmer makes about USD 100 each month, with over 50% of farmers being in heavy debt – worth USD 700 or more per head. As the farms are small and fragmented, they lead to lower yields when weighed against the global benchmarks. Adding to this dispiriting scenario, farmers in India hardly earns about 8-10% of their products’ final value – compare this with 30% or upwards realization in more developed markets. Losses are incurred due to improper logistics, and an estimated 5.3 Bn tonne of soil is degraded due to incorrect implementation of fertilization methods. Moreover, only ~60% of these small and marginal farmers have access to institutional credits.
So how is Agritech addressing such sticky challenges?
India, being ranked the 3rd largest start-up hub globally currently houses more than 500 Agritech start-ups. These homegrown start-ups have been identifying gaps and mending broken bridges across the traditional agriculture value chain.
How Agritech seeks to solve these pain points
Zinnov’s latest report, categorizes Indian Agritech start-ups into 5 major categories based on who they serve and what problems they address, while making the value chain more profitable.
Precision Agriculture and Farm Management: Precision agriculture is a practice that gathers, processes, compares, and analyzes data, and helps farmers make better decisions pertaining to their produce. This cluster of start-ups focus primarily on predicting soil health, weather, farm machinery health, pest, and disease management and more through extensive usage of data points such as farm images, satellite images, and IOT sensors. Based on these data points, ML algorithms help solve the problem in question – say, differentiating crop from weed for instance.
Market Linkage – Farm Inputs & Farming-as-a-service: Start-ups working in this field are focused on making farm inputs more affordable to farmers – they sell fertilizers, seeds, farm tools, and any other input one can think of at Farm Input Marketplaces via mobile apps. Being able to buy inputs at subsidized rates increases the ROI for farmers.These marketplaces also analyze crop-related problems and offer advice. Additionally, these companies have also begun to take care of last-mile delivery through technology and predict supply-demand of inputs based on data-led decisions. BigHaat, incepted in 2015, is one such company that deals in these services.
Supply Chain Technology and Output Market Linkage: Eliminating the intermediaries and optimizing for cost, these start-ups procure produce directly from the farmers and sell it to the consumer. They achieve this through mobile and web-based applications. Being cognizant of wastage and seeking to reduce it, technology also allows for demand forecasting and demand planning. The dynamic product pricing and price forecasting models help prevent inflation while also maximizing the realization for farmers.
Quality Management and Traceability: Quality Management makes extensive use of machine-based Image Analytics to determine the quality of products. Since machines can get this done quicker than any pair of human hands, it optimizes usage of time and human labor. When one orders their groceries online, start-ups ensure end-to-end supply chain visibility of requested products by leveraging Blockchain technology. Meaning, one would know everything about the goods ordered – right from where it originated, the condition of the product, to how it will travel to reach its destination.
Financial Services: Institutional credit is still inaccessible to a large number of farmers in India. Leveraging AI and Big Data, companies can analyze the ability of individual farmers to repay debts. Mobile and web applications have been developed to facilitate loans by gauging the creditworthiness of farmers based on crop data, plot data, spending patterns, and earning information.Apart from this, there are mobile based applications that also make procurement of loans an easy and hassle-free process. Start-ups have also been partnering with banks and NBFCs (Non-Banking Financial Company) to facilitate loans with lower interest rates.
Challenges for Agritech in India
While it is true that start-ups have identified pain points in the market and bred innovative solutions to maximize the produce, as well as profitability for all parties involved – these firms may still face challenges that are indigenous to the nation owing to its complex ecosystem.
Here are a few key challenges –
Farmers being reluctant to adopt technology and wanting to stick to their traditional methods of harvest.
An increase in operational costs because of agricultural workforce and advisory consultants needing to be trained to use advanced technologies and share insights.
The requirement of more modern storage facilities that the nation currently does not have enough of.
The sheer complexity of the agricultural supply chain leading to incorrect data being recorded, causing undesirable results.
Smart devices in remote locations being prone to destruction by harsh weather conditions.
Last-mile delivery being difficult on a large scale as the agricultural sector is largely unorganized.
The risk of bad produce which will cause huge losses to these firms as they rely on the farmers’ good performance.
The Road Ahead
Agritech is a rapidly evolving industry in India having experienced a 9x growth in institutional investment in the past 5 years amassing USD 530 Mn as of 2020. Business and technology initiatives, accelerator programs, public-private partnerships, High Tech penetration which includes the integration of advanced technologies such as AI,ML, IOT, Data Analytics, and Blockchain, to name a few, have digitally transformed the next wave of Agritech start-ups. Though the ecosystem possesses a few critical sticky challenges, it is clear that the Indian agriculture sector has abundant potential for technological progress with such real-time advancements happening in the industry and local start-ups turning out to be real gamechangers in their arenas.
To dig deeper into the potential of the of Agritech space for your organization, prioritize use cases that extract value, and to know more about the recent developments happening in the industry, drop us a note at email@example.com.