Agritech is making a revolutionarily changing Agriculture tech
THE RISE OF THE AGRITECH ECOSYSTEM IN 2023
Introduction
Agriculture has always been at the heart of the Indian economy. The bulk of the population is still dependent on agricultural activity to meet their basic needs. Even though there has been a digital boost amongst the farmer community present in the market, agricultural productivity is still low.?Also, the proportion of agricultural employees in India is anticipated to fall to 25.7% by 2050, based on the latest government?report. Furthermore, with high labor costs, a shortage of skilled workforce, and food security among the primary issues impeding agricultural output, farmers require a technological boost to match the rising demand.?Where other businesses are facing a funding winter amidst this economic crisis, the agritech market is anticipated to increase at a CAGR of almost?50%, hitting a?$34 billion market by 2027?over the next five years, reveals a new report by Avendus Capital. This will only lead to the rise of agritech ecosystem in India. Here are the 3 major trends dominating the industry:
1.??Increased investments in Agri-tech:?An EY report states that the Indian agritech market potential is expected?to be around US$ 24 billion by 2025 According to Entrackr, between January 2020 and June 2022, about 100 agritech startups raised nearly $1.33 billion across 139 deals.?
2.??Boost in Digital Literacy in Tier 2 & Tier 3 cities:?In the last 5 years, smartphone penetration has soared by 150%, reaching 50% of rural households. This has helped to democratize the knowledge that can be used for agricultural management. Short-form video?consumption?has driven social media usage in rural India. The apps like MX Player, Snapchat, and Moj are ranked #2, #4, and #6 in terms of app downloads in India, respectively, according to Digital India 2022 (DataReportal).
3.??Farming-as-a-Service:?Given the uncertainty around commodity prices and marketing, FaaS has been a lifesaver for marginal farmers and farm owners looking to cut fixed expenses and lower the need for collateral. As the cost of using a machine is split across multiple entities, they can rent rather than buy making it more affordable and accessible.
Indian agribusiness is surely getting a makeover and the focus is more on creating a better mobile experience for farmers by arming them with smart devices and digital tools to create a smooth mobile experience. The number of Agri-based Mobile applications has also shot up at a much faster rate. Industry behemoths have already ventured into the field to fill the existing gap in the market. Let’s look at some of the popular agri-based applications:?
1.??ITC MAARS:?FMCG conglomerate ITC launched a super app– ITC MAARS (Meta Market for Advanced Agricultural Rural Services) to boost farmers' income and efficient procurement of Agri products by providing agricultural and related services to farmers on a digital platform. The phygital ecosystem gives farmers AI/ML-driven value-added personalized and hyperlocal crop advisories.?
Features:??
It will also onboard financial partners to provide loans and sell insurance. The app will allow the farmer to check the prices of the products in the nearest mandi and the option to sell them to ITC.
2.??Kisan Agri Doctor: AgroStar
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A one-stop shop for all farmer needs, Kisan AgriDoctor has over 5 Lakh farmers on its Kisan agricultural Helpline app, which also happens to be the highest-rated farming-focused app in India.
3.??Samaadhan FaaS: EM3 AgriServices
Centered on providing technology and mechanization to the farming community on a Pay-for-Use basis to increase agricultural output.
4.??GrainBank: Ergos?
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HOW DO MODERN TECHNOLOGY AND INNOVATION SUPPORT THE AGRICULTURAL SECTOR?
?A technological platform that lets farmers transform their grains into tradable digital assets, get loans against those assets through associate NBFCs and Banks, and get better prices for their output.
The Way Forward:?
Attracting farmers to the mix through a knowledge management portal and using it to engage with them has become an absolute necessity. This platform could be a marketplace, a movie theatre, a medical device, or an upskilling venture in the hands of the group. It is a data mine of valuable information, providing insights into the behavior of one of the largest occupational sectors of the country. The other means could be a??transparent ecosystem?and a mobile app with a smart interface to help make farmers’ journeys more transparent, trackable, and real-time.?Additionally, government initiatives such as an exclusive super app for farmers would educate them on post-harvest concerns including marketing, crop cultivation, and technology. It will also facilitate direct communication between farmers and the scientific community offering limitless possibilities and dramatically improving the experience for farmers, consumers, and organizations. Moreover, the recently announced agriculture-focused accelerator fund in the Budget 2023 would significantly strengthen the agri ecosystem.
?MANTRA LABS
Mantra Labs is a global experience engineering & consulting firm that builds intelligence-driven solutions and delivers digital-first customer experiences for global enterprises. With its 275+ skilled and passionate technologists, the company specializes in providing end-to-end solutions for its clients across eight key industries. Mantra solves the most pressing front & back- office challenges faced by BFSI, Healthcare, and Consumer Internet enterprises. Having worked with some of the World’s leading Insurers like SBI General Insurance, Care Health Insurance, Pramerica, Aditya Birla Health, and AIA Hong Kong along with unicorn consumer startups like Ola, Myntra, Yulu, BlueStone, and Quikr - Mantra Labs has been deeply involved in developing AI-powered technology solutions for business-specific problems. The company also has strategic technology partnerships with MongoDB, IBM Watson, Microsoft Azure, and Nvidia. The role of technology in the farming sector is to enable farmers to make more efficient use of their resources, improve the quality of their crops, reduce wastage, and improve food safety. Nowadays, farming application development companies use AI, and ML.
In agriculture,?India is a land of contradictions. The country produces 11 percent?of total global agriculture and, at the same time, is host to the world’s largest number of malnourished people.?Agriculture provides livelihoods for about half of the Indian population, most of whom are smallholder farmers, yet a majority of government agricultural subsidies are used by medium- and large-scale farmers.?Parallel to India’s tremendous successes in the modernization of agriculture, smallholder farmers have been marginalized. The average debt of a farming household has risen fivefold in a decade, while increases in farm incomes have not kept up, and more than 300,000 Indian farmers have committed suicide since 1995. Given the complexity of Indian agriculture, no single policy change or technology shift will move the country toward its dual goals of raising income for smallholder farmers and continuing to strengthen the competitiveness of Indian agriculture, but the digital transformation of agriculture occurring worldwide holds some promise for progress. Technology is rapidly reshaping agriculture in India, making investment opportunities, invigorating rural areas, and nourishing the world. India’s agriculture industry?is at a crossroads. When India became an independent nation 75 years ago, agriculture was the driver of the economy, having shared more than half of the nation’s GDP. Today, India is still one of the world’s largest and most diversified food producers, and agriculture—the source of more than 20 percent of India’s income—remains an integral part of the economy.
But there are significant hurdles hindering the nation’s unexploited potential. If resolved, a flourishing agriculture industry could both bolster the economy and meaningfully improve farmer livelihoods and income. By 2030, agriculture could back around $600 billion1?to India’s GDP—an increase of 50 percent over its contribution in 2020.?But to get there, India must unlock growth and productivity for the sector. The key to expanding India’s transformation into a farming powerhouse is agricultural technology or ag-tech. India lags behind developed farming nations in ag-tech. Simply put, India’s farmers are competing at a disadvantage: half lack basic farming equipment, three of every four farms are at risk of crop damage from pests and weather, and 50 percent of India’s farmers lack access to traditional financing sources. Those who can get credit often pay inflated interest of 10 to 25 percent above market rates.
If we examine tech’s potential, how it is already improving outcomes, and what investors are looking for as rural India embraces modern farming. Agtech can be a shot in the arm for India’s farmers, making them more profitable and boosting the contribution of agriculture to India’s economy. Factually, the farmer was just one of the many stakeholders involved in a market that centered on?mandis—the local markets where farmers sell their products at auction. The advent of digital technologies and the evolution of multiple agtechs have put the farmer right at the heart of the entire ecosystem. Solutions have begun to be more farmer-centric: each part of the value chain that is digitizing, be it finance, inputs (products needed to grow crops such as seeds, agrochemicals, and fertilizers), or advisory—are directly targeting the farmer.
Agtech is already boosting Indian agriculture
Between 2013 and 2020, the agtech landscape in India grew from less than 50 start-ups to more than 1,000, fueled by increased farmer awareness, rising internet penetration in rural India, and the need for greater efficiency in the agriculture sector.?Moreover, India’s regulatory environment is gradually evolving to enable the growth of digital technologies in agriculture. Agtech in India continues to ramp up—from core companies in the value chain using digital technologies like “super apps” to innovations by start-ups, or “agrifintechs,” and large technology companies. Fully nurtured, the agtech ecosystem has the potential to propel Indian farmers’ incomes to grow by 25 to 35 percent. Existing agriculture incumbents use digital technologies to either go direct to the farmer or to expand products and services across adjacencies. Suppliers are becoming buyers; advisers are adding finance—any combination is possible and happening:
Providers of farming supplies such as agrochemicals, fertilizers, and seeds are using technology to create direct-to-farmer sales channels that bypass middlemen and retailers. For example, UPL (traditionally a core agrochemicals player) is providing mechanization services and agrochemicals to farmers through its nurture. Farm digital platform. The company has also expanded to provide financing, advisory, and market services. Firms, including banks and nonbanks, primarily engaged in providing finance through the farm and rural loans, are using technology to better understand the farmer, provide targeted products, and reduce loan risks. For example, the State Bank of India (SBI) developed the YONO Krishi app to meet farmers’ finance, inputs, and advisory needs. Companies that sell farm equipment have also started providing mechanization as a service to farmers. Mahindra, for example, offers a tractor rental service. Firms that operate in procurement, processing, or the selling of agricultural products have started to integrate backward into the supply chain and create market linkages for the farmer. For example, ITC, a core outputs player, used its e-Choupal network to expand direct-from-farm procurement over the past 20 years. It has now launched the ITCMAARS super app. Using a partnership approach, the app gives farmers access to modern tools, quality inputs at the right prices, and finance.
Fully nurtured, the agtech ecosystem has the potential to propel Indian farmers’ incomes to grow by 25 to 35 percent and add $95 billion to the Indian economy, through the reduction of input costs, enhanced productivity and price realization, cheaper credit, and alternative incomes.
领英推荐
The government’s role in enabling agtech is immense helpful
India’s government has also taken several policy steps and conducted pilots to foster technology and innovation in the agricultural sector:
Easier digital reach through farmer collectivization.?The government has promoted farmer–producer organizations (FPOs), granting $750 million to set up over 10,000 FPOs in the next five years.?FPOs collectivize the otherwise fragmented farmer base, helping agtech companies (such as Samunnati) to easily access and scale up their business models. Development of the “agristack.”?India is creating a unified database of agricultural data sets, which will be linked to farmers based on their land holdings. This will enable agtech companies to customize offerings and products based on farmers’ needs, which vary by land size, crop sown, and soil conditions. Digital soil-health cards.?A digital soil-health-card program entails mapping soil composition and quality at the farmer level. It could help agtech companies in India to promote precision-farming initiatives and tailor offerings for specific farmer groups. Digitally enabled direct benefit transfer in fertilizer sales. This initiative directly transfers subsidies for fertilizers and other goods to the farmer. It authenticates the farmer’s identity at points of sale and through verification. It could significantly encourage the adoption of fertilizers and reduce leakages in transportation, maintaining affordability for smallholder farmers.
National Agriculture Market (eNAM). This pan-India electronic online trading portal connects existing Agriculture Produce Market Committee (APMC)?mandis, forming a unified national market for agricultural commodities that ensures better prices for farmers through the transparent auction process. Agricultural Accelerator Fund and digital public infrastructure.?The government has recently announced a new fund for promoting the agtech ecosystem, potentially seeding new start-ups that may increase digital adoption and the range of digital solutions available to farmers.?Additionally, the government announced its intent to build an open-source digital public infrastructure that will likely support agtechs with relevant information services across the value chain. These initiatives are building an agtech ecosystem in the country, supporting farmers in areas where they need the most help.
What are investors' quests?
With government initiatives and the openness of farmers to tech adoption, agtechs are poised to engage with India’s farmers, but to be successful, they will need stable sources of funding and a vibrant, supportive ecosystem in a transparent manner never before. Agriculture technology in India has flourished with the growing attention of venture capital (VC) in recent years. Accel and Sequoia Capital invested in companies such as Samunnati, Ninjacart, DeHaat, and Bijak.?During the past four years, agtechs in India have raised roughly $1.6 billion. VC firms invested more than $1.2 billion in 2022 alone through 114 deals, a 50 percent increase from 2021 and triple the investment made in 2020. The average deal size is growing, indicating that start-ups are maturing in this space despite an economic slowdown during the past two years. Of nine agtech categories, 90 percent of all VC funding was directed at five categories in 2022:
Downstream agtechs:?These are primarily B2B or B2C platforms or brands to connect farmers with businesses or consumers. In 2022, such firms as Ninjacart, Absolute, and Waycool raised more than $707 million in funding. Funding decisions are driven by the maturity of business models, the need for follow-up rounds of investments, and highly accessible and monetizable opportunities across categories.
End-to-end ecosystems:?These are platforms that play across the value chain and have a significant presence in multiple segments, such as inputs and outputs. In 2022, such firms, for example, DeHaan, attracted more than $113 million in funding. Digital solutions and precision agtech:?These are digital solutions or products which provide farmers with services such as advisory, precision farming, and sensor-based solutions. In 2022, companies such as Cropin attracted more than $92 million in funding. Midstream agtechs:?These are agtechs that help provide supply chain solutions that improve efficiencies in areas such as logistics and warehousing. In 2022, firms such as Arya attracted more than $80 million in funding. Agribiotech:?These are agtechs that leverage biotechnology to create green and sustainable new products or ingredients such as food additives. In 2022, firms like String Bio attracted more than $63 million in funding.
Unlike the rest of the world, where agricultural investment has centered on innovative foods—think Impossible Burgers or other plant-based foods—investment in India has centered on the basics: financing and technology to improve agriculture and farm practices and to avoid climate risks (such as droughts, pests, and flooding). As a result, investors approach India with a different view. These VC firms suggest that they focus on five factors when making decisions about new technologies: the size of the market, the breadth of offerings, traction with customers, an ability to scale, and the X factor (intangibles such as the learning curve it takes to use the new technologies efficiently).
Grow or die: Agtech success in India
Investors in Indian agtech are, or should be, asking some basic questions, including the following.
Does an agtech invest in multiple touchpoints and breadth of offerings??Unlike e-commerce, agtechs get low transaction volumes for farmers but pay high acquisition costs, such as getting a farmer to install an app and try a product. This is complicated by the continual efforts of multiple agtechs and incumbents to enter the space, lowering costs, and the farmers themselves being willing to experiment with multiple apps in the hope of the most value. To overcome this challenge, start-ups such as Gramophone, Samunnati, DeHaat, and more are offering more touchpoints and broadening their product portfolios to provide services across the value chain, from inputs and financing to advisory. Even platforms that start out with a single use case are expanding into adjacent parts of the value chain.
Does the agtech embrace a ‘phygital’ model??Phygital (physical plus digital) is a marketing term that describes blending digital experiences with physical ones. As the channels of rural India, both physical and digital infrastructure are important. Although 75 to 80 percent of farmer households have access to a smartphone,?most still prefer to have physical touchpoints for digital support such as tutorials or help with app installation. Agtechs such as Agrostar and DeHaat have field teams to make on-ground visits and drive campaigns for greater penetration of their apps. One way to support a customer: the ITC e-Choupal ecosystem has managed to bridge the gap in rural digital infrastructure through a network of central sanchalaks (overseers), who act as physical touchpoints for the ecosystem and on whom farmers continue to rely. In-person contact with the farmer can happen in multiple ways. Field representatives are one option. Other examples include a fertilizer supplier’s presence in India’s local micro markets or rural bank branches for agrifintechs. We have also to answer the following question:
Is the agtech charging for the right product or service??The right monetization model is crucial. Some firms are trying to monetize advisory services, but most farmers—not just Indian farmers—are reluctant to pay for advice. In general, advice is a gateway to business, not a business itself.
Is the agtech light on assets??Agtechs that rely less on investments in assets can scale up across geographies quickly. For example, Agribazaar reached $2,250 million of gross merchandise value in fiscal year 2021,?with a fixed-asset base of around $2.5 million. It did so by shifting the responsibility of storage, quality checks, and transport to buyers and sellers on the platform for most of the transactions. Agtechs that require investments in physical infrastructure or assets typically try to keep their models dependent on local entrepreneurs who make investments in equipment and facilities. For example, DeHaat and Agrostar use village entrepreneurs to provide last-mile service and deliveries within villages, enabling them to aggregate demand and deliver larger volumes.
The possibility of ?a bumper crop in Indian agriculture
The investors and agtechs that navigate India’s unique hurdles may see boundless potential. The next three to five years will be critical for incumbents and new players.?It likely won’t become a winner-takes-all market. A few major players, especially those with strong supply chain linkages to the farm, could emerge as dominant players in this space. These companies could support a host of smaller, niche players that will in turn leverage the end-to-end platforms for growth. The collaboration will be crucial. While agtechs might facilitate better decision making and replace manual farming practices like spraying, reducing dependence on retailers and?mandis, incumbents remain important in the new ecosystem for R&D and the supply of chemicals and fertilizers. There are successful platforms already emerging that offer farmers an umbrella of products and services to address multiple, critical pain points. These one-stop-shop agri-ecosystems are also creating a physical backbone/supply chain—which makes it easier for incumbents and start-ups to access the fragmented farmer base. Agtechs have a unique opportunity to become ideal partners for companies seeking market access. In this scenario, existing agriculture companies are creating value for the farmer by having more efficient and cost-effective access to the farmer versus traditional manpower-intensive setups. It is a system that builds: the more agtechs know the farmer, the better products they can develop. India’s farms have been putting food on the table for India and the world for decades. Digital technologies could enhance production at every step, from high-quality agriculture inputs to world-class agriculture outputs. This could help create sustainable growth for the Indian farmer, boost economic fortunes in rural areas in a flourishing ecosystem, and benefit the entire economy. The food and agriculture sector’s transition to net zero: Production reform and demand shifts.
??The ultimate GOAL: TRANSITION TO NET ZERO
?To capture value from the net-zero transition, food and agriculture leaders turn to efficiency enhancements, carbon sequestration, and alternative proteins. Natural carbon sinks. Next-generation technologies, innovation, and investment opportunities could center around these areas: enhanced production of food and livestock; food production decarbonization and carbon sequestration; and plant-based and lower-emission protein production for alternative food products. The shift toward green farming practices could stimulate demand for the supplies and equipment that?enable on-farm decarbonization. New technologies for disease resistance or enhanced carbon sequestration could play a powerful role in the transition to sustainable food production. Other economic opportunities could stem from the shift away from the production of ruminant-animal protein and toward other proteins—for example, plant-based “meat” or alternative-protein sources—that could lead to a faster consumer dietary shift. Unlocking industry challenges?around the limited access to technology, lack of scale (small holdings account for three out of four farms around the world), and access to capital would likely lead to other business opportunities in the digital and financial services supporting the transition to net zero. Given the breadth and scale of the agricultural sector, support for on-farm interventions would likely vary based on geography, farm type and structure, and farm output. In the near term, helping farmers engage and adapt green farming practices and providing access to capital early on may accelerate the transition. On the demand side, changing what people eat may take longer and require new mechanisms that reward farmers and consumers for adopting lower-emissions practices. For more on how eight industries may transition in a 2050 net-zero scenario, see “Spotting green business opportunities in a surging net-zero world.” Food and agriculture sector timeline. Capital spending 750B and spend it (average for a ten-year period). The up-front expenses of low-emissions farm equipment and infrastructure, as well as costs to maintain existing equipment, could be significant for individual farming operations, especially for smallholder farmers. Over the longer term, the operating costs may outweigh the capital spending required—or may be cost-neutral to individual farmers as promising measures in emissions-efficient farming (including zero-emissions on-farm machinery and equipment, variable-rate fertilization, and dry direct seeding) may reduce costs over time.
?The rising use of bioenergy could lift the demand for biomass, and production growth could accelerate between 2030 and 2040. Concurrently, the meat substitute market is also expected to grow around 10 percent annually, 12 percent annual growth by 2030 in biomass production potentially reducing the transition costs as it costs less to produce protein-rich foods like legumes and soybeans than beef and lamb. By 2040, 27 million jobs created 2040 as estimated. Job gains expected from the transition over the next 30 years would only somewhat offset larger expected job losses due to productivity increases and the broader farm-to-nonfarm transition, a global trend witnessed over the last two decades that is expected to continue. The sector overall is expected to see reduced employment in line with this historical trend.
By 2050
?This analysis is a hypothetical scenario and is not meant to serve as a projection or prediction. It is based on the NGFS Net Zero 2050 scenario using the regional model of investment and development and the model of agricultural production and its impacts on the environment (REMIND-MAGPIE) (phase two). In some instances, variables were downscaled by Vivid Economics to provide more sector granularity. Market opportunities in The net-zero transition in food and agriculture could stimulate demand for the supplies and equipment that enable on-farm decarbonization and further drive the commercialization of new technologies and alternative sources of protein. $840 billion average annual capital spending is required to reach net zero by 2050 $570 billion current annual public support (in repurposed subsidies) is provided to agricultural producers in the 51 countries that produce two-thirds of food globally
?The alternative-protein market gains momentum
The alternative-protein market will likely be an important contributor to reduced emissions, though changing what people eat may require extensive efforts, including consumer education. Some experts predict?that by 2030, alternative proteins will be ubiquitous and offered as an option at most fast-food and fine-dining restaurants. Several factors including shifting consumer demand, regulation, and innovation may impact the scale and speed of adoption.
Consumer motivations
?Habits, aspirations, and cultures with respect to meat eating continue to evolve. More people listed?health as the primary reason for shifting to plant-based diets. The knock-on positive impact on the environment (including reduced deforestation) may motivate others. Alternative-protein companies are navigating uncharted waters. New regulatory frameworks are emerging alongside these new food products. Regional differences may create pockets of opportunity to test new products. Players in this space will need to keep a close eye on unit economics to better price novel food products and keep it attractive. Bio innovations may drive demand for alternative proteins?and could impact the logistics and transportation sector. The potential to create “a steak that is indistinguishable from a traditional steak, or an alternative French cheese that is indistinguishable from the best Camembert in the world, will be an interesting moment when we get there.”
Spotting green business opportunities in a surging net-zero world
In an eight industries may transition to a net-zero world, and how organizations can respond with green businesses that create value along the way.?
Buildings:?Net-zero builders can create value by investing in next-generation technologies, replacing equipment with low-emissions models, and improving energy efficiency.
Forestry & other land use:?Stopping deforestation will be critical to halting climate change. Natural climate solutions could provide new lines of revenue as the world’s carbon markets mature.
The net-zero transition: What it would cost, what it could bring
??A marginal abatement cost curve offers a perspective on how 25 proven GHG-efficient farming technologies and practices could reduce emissions by about 20 percent by 2050. ?Alternative proteins have the potential to dramatically slow climate change. This interview with three leaders in the field reveals the strategies and insights needed to unlock that potential.
?CONCLUSION
?2023 has been a landmark year for agri-tech companies in India. With the government’s vision to digitize the country’s agricultural sector, numerous initiatives have been launched to make farming more efficient and sustainable. This has resulted in increased adoption of agri-tech products and services across the nation. From satellite-based crop scouting applications to automated irrigation systems, farmers are taking advantage of cutting-edge technology to improve their yields and profits. The success of these companies indicates that India is on its way to becoming a leader in the global agri-tech?