January 20, 2024
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
Indian agriculture is at a crossroads. From climate change to low farmer incomes, agriculture is facing a crisis. It has historically been the driver of the economy, contributing more than 50% in the past but dipping drastically since then. It continues to employ roughly half the workforce, so it remains central to the economy and it has made India one of the world’s largest and most diversified food producers. Reviving Indian agriculture will require a multi-pronged approach and part of the solution may be technology. It can reshape the farm sector, enrich rural areas and raise food output.
Most agree that Indian agriculture has tremendous potential. If enabled to flourish, it could contribute $600 billion to India’s GDP by 2030 — a rise of 50% over 2020. However, low productivity is a towering hurdle.
The key to the future could be agricultural technology, or agritech. India is way behind other nations on this front, which puts our farmers at a serious disadvantage. More than half of India’s farms lack even basic farming equipment, 75% of them face pest and climate risk and half of India’s farmers have no access to institutional finance, driving them into the clutches of local moneylenders who charge exorbitant rates of interest.
This is worrying because India has the highest dependence on agriculture among major economies. As I said, productivity is a concern. The US, Brazil and China are way ahead of India when it comes to output per farm employee and cereal yield per hectare.
This is where agritech could come in. It is, simply put, using technology to produce more with less, to make farms more efficient, and it can impact every stage of the process – from monitoring soil quality to predicting weather and from maintaining supply chain efficiencies to accessing finance. If it takes off, it is estimated that agritech could raise farm incomes by up to 35% and add $95 billion to India’s economy.
However, agritech penetration in India is a low 0.8%. So, as an industry, it has huge potential for growth and employment too, and the exploding smartphone market and fast-rising internet penetration are great enablers.
The way the farm sector is structured, the farmer is just one of many pieces of the puzzle despite being the producer. The sector revolves around the mandis — local markets where farmers sell their produce. Digital solutions and agritech, however, put the farmer at the centre of the entire ecosystem. This is done by digitising the value chain.
Let’s look at a few examples. Sellers of agrochemicals, fertilisers and seeds are creating direct-to-farmer sales channels to bypass middlemen and retailers, thus lowering prices for farmers. For example, UPL offers mechanisation services and agrochemicals to farmers through its nurture.farm digital platform. It has now expanded into financing, advisory and market services through that platform.
Credit providers are using technology to better understand farm needs and design products better suited to their customers. State Bank of India, for example, has the YONO Krishi app for farm finance.
Corporations in procurement, processing and selling are integrating backwards into the supply chain. ITC is using its e-Choupal network to expand direct-from-farm procurement and its ITCMAARS super app gives farmers access to modern tools, advice and finance.
It’s no wonder then that, between 2013 and 2020, the agritech industry went from fewer than 50 startups to more than 1,000 today.
There are segments within the wider agritech space that are exciting. By 2027, the food crop segment is expected to grow from $3 billion to $25 billion. Fibre crops, cattle and dairy, poultry and aquaculture will all grow. Foodtech is seen as the first opportunity, with the market expected to grow from $209 billion to $341 billion over the next few years.
According to a report by Avendus, a financial advisory and solutions firm, trading and auction platforms are likely to transact more than $8 billion worth of produce over the next five years. Meanwhile, agri fintech is likely to facilitate loan disbursals worth over $3 billion.
Many players are already working on how to improve output through data analytics and machine learning. These platforms would include crucial processes like real-time exposure to auction prices. Artificial intelligence technology could be used to monitor crop quality and platforms that ensure traceability and transparency across the supply chain are in the making. Already, drones are being used for crop monitoring.
In the next five years, says the Avendus report, agritech is poised for extraordinary growth and industry players could transform agriculture across all stages of the value chain.
This is why Indian agritech is also attracting investors. From 19 deals worth $187 million collectively in 2018, the industry got more than $1.1 billion in funding in 46 deals in 2022.
There are several challenges facing the adoption of agritech, the greatest of which is a lack of understanding. Farmers usually don’t know about it, which naturally hinders its adoption. There is also limited tech exposure, so solution providers have to invest a lot in training and ensuring accessibility of digital solutions in local languages.
Since it often involves data and connectivity there are legitimate concerns about security and privacy. India needs clear regulations around it. Also, while connectivity is getting better, there are too many areas with no internet access or with low bandwidth.
Nevertheless, agritech could reshape India’s farm sector. Here are a few areas of great potential.
First, predictive analytics – that is, analysing current and past data to predict farm outcomes. This provides actionable insights to farmers in terms of resource optimisation, market prices, etc. Other such tools aid decisions on sowing time, irrigation and fertiliser use. Satellite pictures can predict insect attacks.
Agricultural robotics, meanwhile, can step in when there are labour shortages. They can also execute precision seeding, weeding and harvesting. Sensors, meanwhile, can analyse soil quality and optimise water use.
The sensors can also give farmers valuable inputs on moisture and weather and detect animal breaches in fields, thus helping farmers secure their perimeters.
For a country grappling with the challenges of feeding a large and growing population sustainably, agritech is a powerful tool. Agritech, like any other sector, can transform the wider industry it is in but it needs encouragement and enabling regulations. It could spark the transformation India needs for a food-secure and sustainable future.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at firstname.lastname@example.org. Catch you again soon.