The era of agritech: Will it make India a farming powerhouse?
India has the highest dependence on agriculture amongst major economies. However, despite its significance, agriculture suffers from low productivity. But, there's hope on the horizon.
Agriculture is a critical sector, contributing 18 percent to India's GDP and employing 45 percent of the national workforce. For the same reason, farm input and output are both large industries in India.
Agricultural inputs mean seeds, fertilisers, manures and agrochemicals and any external source put into soil that can help a farmer's yield. Agriculture output is essentially crop yields. These are expected to be $86 billion and $430 billion dollar industries by FY26, as per RedSeer.
India has the highest dependence on agriculture among major economies. However, despite its significance, agriculture suffers from low productivity. When comparing the output per agricultural employee and cereal yield per hectare, the result emerges that countries like the USA, Brazil, and China outperform India. But there's hope on the horizon!
Here’s where agritech comes in! Agritech or agricultural technology, is simply the application of technology to produce more with less, to make the farming process more efficient, from field monitoring to the food supply chain itself. The agritech explosion is not just a possibility; it's inevitable! And there are a few reasons why we say this.
With a whopping underlying agriculture market size of $493 billion and a current tech penetration of only an abysmal 0.8 percent, the opportunities for growth are massive.
Secondly, the rapidly rising internet and smartphone penetration in rural India where the agriculture sector is predominant makes it ripe for tech adoption and transformation.
And then you have the strong impetus from the government with supportive policies. For instance, the government is developing an “agriStack’ in collaboration with Agritechs to make it easier to bring various Stakeholders together to improve agriculture in India to boost access to credit and crop information.
It is also providing up to 100 percent subsidy to promote Kisan drone's uptake by farmers, a fund for Agritech startups is also in the pipeline and the eNAM, which is a platform that promotes better marketing opportunities for the farmers to sell their produce through online competitive and transparent prices.
The agritech GMV or Gross Merchandise Value is projected to experience an eight-fold growth from 2022 to 2027, going from $4 billion to a staggering $34 billion.
Within agritech, different sub-segments present exciting opportunities. By 2027, the food crop segment alone is expected to grow from $3 billion to $25 billion. And that's not all! Fibre crops, cattle and dairy, poultry, and aquaculture segments are also projected to experience significant growth.
Foodtech has the largest addressable market within agritech, and the total addressable market here is expected to grow from $209 billion to $341 billion in the next few years, presenting those 25 billion opportunities.
Beyond the core agritech market, there are incremental opportunities across the value chain. As per data from an Avendus report, trading and auction platforms are estimated to transact over $8 billion worth of produce.
Farm gate warehousing aims to manage more than $10 billion worth of agri-commodities. Quality assessment is projected to cover a GMV of $5 billion worth of produce, while agri fintech is expected to facilitate loan disbursals worth over $3 billion.
So, what does all of this mean? In the next five years, Indian agritech is poised for remarkable growth, Avendus finds. With a projected 50 percent GMV CAGR, 8-10 unicorns, two-three public listings, and a positive impact on 40 million farmers and users, the potential increase in total farmer income could surpass 100 percent.
Agritech players are transforming the way agriculture is traditionally being done across all stages of the value chain.
For instance, data analytics and machine learning play a crucial role in improving productivity. Platforms and data-driven solutions for price transparency empower farmers by providing access to real-time information on input and output prices.
Imaging those AI technologies are utilised to monitor crop quality, allowing for automation in output grading and yield classification. Platforms for producing traceability enhance visibility and transparency across the supply chain. Robotics and drones have emerged as valuable tools in agriculture. And farming as a service can optimise equipment utilisation and reduce idle time.
Funding in the agritech sector has been on an impressive growth trajectory, reflecting the increasing interest and confidence in this industry. From $187 million in funding across 19 deals in 2018, the agritech sector received over $1.1 billion in funding across 46 deals as of 2022, despite the funding winter and macro headwinds. In the first six months of 2023, the country has seen about eight deals of 161 million dollars. Below are the details of Agritech fundings for the previous five years:
Funding in Agritech in India:
| Year | Funding ($ mn) | No. of Deals |
| 2018 | 187 | 19 |
| 2019 | 397 | 27 |
| 2020 | 403 | 21 |
| 2021 | 1,222 | 45 |
| 2022 | 1,114 | 46 |
| 2023 (six months) | 161 | 8 |
First Published: Jul 26, 2023 4:50 PM IST
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