Disruptive business models stimulating agriculture: CII-Bain report

Various start-ups are removing systemic deficiencies in inputs and marketplaces, precision farming, processing, and storage

March 4, 2022

New players in the agri-start-up space are improving distribution efficiencies

The Small Farmers Agribusiness Consortium (SFAC) will launch an integrated platform to ensure farmers can access agri-services

Between 2017 and 2020, agri-tech startups attracted INR 6,600 crore of private equity investment

Government schemes such as the Agriculture Infrastructure Fund are drawing credit to build community farming assets and post-harvest agriculture infrastructure

The food and agriculture sector is expected to witness enormous transformation through the introduction of new-farming models, advanced agri-tech services, and new food products that will replace traditional farming systems, according to a new CII-Bain report. The report titled ‘Innovation in India’s Rural Economy’ states that over the past six years, various start-ups have started to eliminate systemic deficiencies in inputs and marketplaces, precision farming, processing, and storage.

New players in the agri-start-up space, such as Ninjacart and WayCool, are improving distribution efficiencies by reducing leakages when perishable commodities are moved from farm to mandi. The CII-Bain study also noted that the newer generation of farmers and farmer producer organizations (FPOs) have started to adopt more digital technologies as new business models have started to develop across the agriculture value chain.

In addition, the SFAC will launch a ‘platform of platforms’ to ensure that agri-services are accessible to the farmers through the electronic National Agriculture Market (e-NAM) digital platform. This platform will provide private entities with integrated services such as transportation, logistics, assaying, weather, and fintech. It is expected that around 1.75 crores of registered farmers, FPOs, traders, commission agents, and other stakeholders with the eNAM platform can avail of these services once the digital integration is completed.

Role of traditional players

Agriculture, accounting for approximately 37% of the total rural GDP in 2019-20, is the largest contributor to the rural economy. Between 2017 and 2020, agri-tech startups attracted INR 6,600 crore of private equity investment for activities such as building sustainable systems, finance technology, and ensuring inclusive growth.

Large traditional players are also adopting technology to reduce operational costs and scale, either by developing in-house solutions or by partnering with emerging players. Global tech giants like IBM and Microsoft have started to view this space as a new growth opportunity and are investing in innovative solutions for activities such as crop health monitoring and yield estimation.

Government driving improvement of rural infrastructure

Over the past decade, the rural infrastructure has improved because of interventions by the government and private sector entities. Government schemes such as the Agriculture Infrastructure Fund are drawing credit to build community farming assets and post-harvest agriculture infrastructure. Schemes like Pradhan Mantri Mudra Yojana (PMMY) have been launched to fund manufacturing, trading, and service sectors. As of December 2021, more than 320 million loans worth INR 17 lakh crore have been sanctioned under PMMY.

Demand for credit has increased in rural areas, especially among consumption-driven loan products like those for two-wheelers and consumer durables. The CII and Bain report adds that approximately 35% of agri-credit business comes from three states: Tamil Nadu, Andhra Pradesh, and Uttar Pradesh. There has been a significant increase in access to credit in the rural ecosystem with agri-credit growing from INR 8 lakh crore in FY15 to INR 14 lakh crore in FY20.

These developments can be attributed to improved physical infrastructure, connectivity, and advancements in digital infrastructure. Rural smartphone and internet penetration increased by 30% annually over the last five years. Technology disruption played a key role in this growth by lowering loan servicing costs, which enabled lenders to service lower-value loans.