Investments In Agri-Tech Startups Between 2017 And 2020

UPI transactions in rural India doubled in the past year, and agri credit grew approximately 10% over the last five years

NEW DELHI—March 2nd, 2022 – India’s rural economy contributed nearly half of the nation’s overall GDP in 2019–2020. Two-thirds of India’s population participated in its rural economy in the past two years, and agriculture—the largest sub-sector within the rural economy, had the highest share of output, contributing approximately 37% of the total rural GDP. The Indian agriculture sector has been growing steadily at a compound annual growth rate (CAGR) of 11% since 2015, supported by government and private sector initiatives towards improvements in its physical and digital infrastructure. It has also witnessed the highest disruption in terms of smartphone and internet penetration. This ecosystem is now at an inflection point, and companies that address inefficiencies across the value chain will have explosive growth potential. These are among the findings of a report from Bain & Company and Confederation of Indian Industry (CII) titled, ‘Innovation in India’s Rural Economy: Disruptive Business Models are Stimulating Inclusive Growth in Agriculture and Rural Finance’, released today. The report explains that over the past decade, India’s rural ecosystem has evolved significantly with multiple enablers priming this space for future growth. These trends have created an environment ripe for innovation—allowing start-ups and traditional players to introduce disruptive business models that address inefficiencies, particularly in India’s agriculture and finance sectors.

Significant domestic and international investments are being pumped into the sector to improve efficiency and access to credit. Private-equity investments in the agri-tech space have skyrocketed in the last four years, growing at more than 50% per annum to aggregate approximately INR 6.6K Cr till 2020. Investors have focused on opportunities that address systemic issues, build sustainable systems and ensure inclusive growth. Several global tech giants see this space as a new growth opportunity and are investing in innovative solutions for crop health monitoring and yield estimation. Parijat Jain, partner, and leader of Bain’s Agribusiness practice in India, said, “Disruption in India’s food and agriculture will evolve from traditional agriculture to new farming models, advanced agri-tech services, and new food products. In the last six years, several start-ups have emerged to reduce systemic inefficiencies among inputs and marketplaces, precision farming, processing and storage”. As newer generations of farmers and FPOs become digitally savvy, new business models are emerging across the agriculture value chain, from inputs and harvesting to processing and distribution. Information and transparency initiatives are addressing existing inefficiencies and formalising a traditionally informal sector.

Tarun Sawhney, Chairman, CII Rural & District Economy Council said “India’s rural economy is poised for future growth enabled by rural digitisation, affordable technological access, financial inclusion initiatives, FPO and FPC community empowerment, improved infrastructure and access, increased investor focus, and a surge of tech startups in the space”. Accelerated by the pandemic, Unified Payments Interface (UPI) transactions doubled in the past year, processing eight times more transaction value today than credit cards. Multiple other factors have fuelled the swift uptick, including access to smartphones, lower cost of data, and Aadhaar building a digital identity that enabled services like Know Your Customer (KYC) and e-sign. Plus, access to banking facilities has also increased. According to Bain-CII estimates, about 30% of the rural ecosystem is adopting digital payment and digital commerce solutions to avail easier access to agri-financial services.