Agritech startups: Will they prove game changers for Indian agriculture?

• Startups play an integral role in promoting the culture of innovation in a society. And for a society where nearly 50% of the total workforce is engaged in agriculture, innovation is a necessary to make this activity profitable for farmers.
• Around 450 agritech startups are in operation in India at present, and they have received funding of US$ 248 million by June 2019, growing by 300% YoY.
• Though these startups are playing a positive role, these startups face critical challenges such as technology adoption, customer inertia and difficulty in getting finance.
• It is essential to build and develop technology that is tailored to Indian agriculture rather than blindly borrowing expensive foreign technology. Banks and financial organizations, too, must offer more creative models of financing for this ecosystem.

Startups play an integral role in promoting the culture of innovation in a society. And for a society where nearly 50% of the total workforce is engaged in agriculture, innovation is a necessary to make this activity a profitable one. Contributing about 17% to India’s GDP, agriculture has tremendous potential to increase the share of India’s revenue. However, India’s farmers face numerous challenges right from climate change, declining productivity, inadequate processing facilities, lack of access to markets, and inability to get a fair price for their produce.

There is hope from India’s startup sector. Over the past few years, around 450 agri-tech startups have come up in India, which are powered by a pool of educated youth driven by the zeal to launch newer technology and business models to lift the face of agriculture in tune with the needs of the present day. As Nasscom President Debjani Ghosh rightly notes, “India’s agriculture sector is advancing steadily towards its digital transformation and the startup ecosystem is playing a critical role here, bringing innovation and disruption in much-needed areas.” According to NASSCOM, funding for this sector reached US$ 248 million till June 2019, growing by 300% YoY. Furthermore, around 48% of CEOs surveyed by NASSCOM feel that India could soon see its next agritech unicorn emerge in the coming three years.

These agri-businesses might be in infancy, but they are showing a lot of promise in their endeavors to transform the value chain from farm to fork and provide missing links in Indian agriculture. From farm automation, weather forecasting and equipment renting to online vegetable marketing and innovative food processing and packaging – startups have focused their attention on all facets of Indian agriculture, promising a makeover in the coming years.

An interesting case in point is NaPanta, a Hyderabad-based startup that was launched in 2017. This startup helps farmers track prices of over 300 agricultural commodities in 3,500+ markets, monitor their expenses, buy and sell products, seek advice on weather, soil, crop insurance and more through its app. WayCool, a Chennai based startup, reduces waste and inefficiency by using analytics, process management software and connected devices. It has positively impacted the lives of 500,000 farmers in India and distributed fresh produce to sellers ranging from small shops to large retail outlets. Ergos is a rural warehousing company in Bihar which operates a chain of efficient and hygienic rural warehousing facilities that accessible to small farms.

Source: FICCI-PwC report

While one needs to appreciate the efforts being made by agri-tech startups in India to address the problems faced by Indian agriculture and serving as bridges between the farm to fork transmission of agricultural products, they have their fair share of challenges. A report by FICCI & PwC titled Agri start-ups: Innovation for boosting the future of agriculture in India identifies some of the key impediments to the smooth functioning & growth of agricultural startups in the country.

For starters, the scattered landholdings of farmers decrease the scope of technology scale up, leading to poor cost effectiveness. Secondly, given the fact that most of the technology that is being incorporated is foreign, technology adoption and penetration becomes a time-taking process, thereby reducing the investors’ interest. So, getting institutional credit is a challenge for some of these startups. Added to this is the fact that many small and marginal farmers are not very open to using new technology as it is very costly and entails out of pocket expenditure for them.

Further, the rate of return on investment in technology has not been very profitable so far. Finally, as recent findings by Internet and Mobile Association of India (IAMAI) suggest, growth in India’s internet user base has been muted for the second year in a row due to high charges and the low adoption of smartphones. While the figures recorded for 2016-17 were 12%, those for 2017-18 were 8%. It is estimated that the final figures for 2018-19 will be even lower than the last year’s growth rate. Owing to this, a lot of apps developed to benefit farmers still fail to reach them.

Schemes like government’s Startup Agri India scheme, the Digi Gaon (Digital Village) initiative, and Bharat Net Project are steps in the right direction, more needs to be done to give wings to India’s emerging startups in this space. Banks and financial organizations must offer more creative models of financing for farmers, entrepreneurs, incubators and accelerators.

It is essential to build and develop technology that is tailored to Indian agriculture rather than blindly borrowing expensive foreign technology. For instance, a Nashik-based startup, Mitra, has developed sprayers for vineyards and for pomegranate farms to improve mechanization. Lastly, we need to push the penetration of smartphones and internet in the country. Farmers should be encouraged to use them so that they can access informative & user-friendly apps easily to get better outcomes for their efforts.