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Interesting times ahead for Indian agri-tech, adaptability the key for companies

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Title: Interesting times ahead for Indian agri-tech, adaptability the key for companies Originally reported on by guest 20000756 – TECH NEWSer | 20000757 – Agricultural Technology | •| Tech |•| Newser |•| Technology | •| Agricultural |•| Technology |

Interesting times ahead for Indian agri-tech, adaptability the key for companies.

By Rishi Agarwal

Various challenges – the Ukraine war, climate change, low attractiveness of farming as a career means that the world is going to face a food shortage challenge soon. Though relatively nascent, agri-tech innovations have the potential to address some of these challenges. If utilized correctly, these innovations can drive sustainable and equitable growth, ensuring better yields, higher profitability, and improved livelihoods for farmers.

In India, some of these challenges are magnified due to intensive cultivation and improper nutrient replenishment leading to stagnating or declining yields of most crops. Rising input prices and production costs add to the problems, as does the unavailability of key inputs during peak seasons. This was most recently seen in the severe shortage of di-ammonium phosphate during the 2021 sowing season which led to adverse law and order situations in some states.

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Tech-tonic shifts in India’s agricultural landscape

Over the years, there have been major changes in India’s agricultural landscape, primarily led by technology-first start-ups that bring a new package of practices to an otherwise traditional industry. These next-generation companies are making better information and technology available to farmers, providing opportunities to improve their incomes, better their livelihoods, and engage in more sustainable food production. Here are some of the trends we have observed taking place in this space:

  • A surge in the Indian agri-tech start-up funding with a six-fold growth in capital flows (from $44 million in 2016-17 to $323 million in 2020-21), primarily aimed at start-ups focused on disintermediation through direct provision either at the input or the output stage
  • This influx has created 5-7 late-stage start-ups, each valued between $300m and $800m
  • Some large, late-stage start-ups have now begun transitioning to a ‘full-stack’ platform approach to increase their share of the farmer’s spend and earn higher margins through value-added services
  • Investments in in-farm innovations like artificial intelligence (AI) and Internet of Things (IoT) solutions, robotics/drones, and farm management software are the next horizon of investment, with funding growing four-fold from $10 million (2018-19) to $39 million (2020-21)

However, most of these innovations are in their early stages. Traceability, for example, is a use case for AI- and IoT-enabled technologies that cut across pre- and post-harvest stages and improve farmers’ ability to improve realizations. However, there are very few at-scale solution providers in India. CropIn, the oldest start-up in this category, was among the first to introduce seed-to-shelf traceability using QR code stickers, but only in 2018-19. The field is seeing new solutions emerging though with companies such as TraceX entering the field.

Challenges remain

Recognising the potential of innovative farming systems, traditional players are also initiating strategic investments in this area. However, challenges remain.

Traditional agriculture companies, which have been lagging behind start-ups in most categories, need to embrace technology to succeed. They also need to provide specialised solutions. For example, players with strong R&D and technical expertise and capital investments may choose to double down on their strengths to become ‘specialised solution providers.’ They can also expand into adjacencies, or provide ‘end-to-end’ solutions. For example, players with solid on-ground networks may choose to expand into adjacencies, gradually moving toward ‘end-to-end solution providers.’ However, these companies will need to be innovative in staying in touch with and expanding their farmer networks through a mix of digital and in-person interactions.

For either of these paths, however, these companies need to embrace not just technologies such as data analytics and digital networks but relook internally at their decision-making and capabilities to ensure that they are actually able to leverage these investments. Based on their growth ambitions, these players can opt for capital investments, strategic partnerships, or corporate venturing to succeed across the agri-tech value chain.

Diversity in start-ups

There is significant diversity in start-ups ranging from SaaS (software-as-a-service) platforms to AI- and IoT-integrated hardware for sensing, monitoring, and farm automation. Farm automation solutions address the growing labour shortages. Solutions such as remote sensing and monitoring and technology-integrated farm management software improve farmers’ ability to make data-driven decisions.

Although not a clear trend, it is worth noting that to achieve scale and profitability at a faster pace, a few in-farm solution providers are moving towards disintermediation as agri-commerce has a shorter pathway to scale compared to in-farm technology solutions.  

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Seeding ideas for the future

The agri-tech sector is poised for breakout growth and to improve farmers’ livelihoods. This next wave is expected to and dependent on the adoption of technological solutions, sustainable farming practices, and the carbon economy.

The trend of agri-tech mainstreaming will continue, with the government playing a key role as a facilitator for private sector participation. This was visible in the budget announcement for 2022-23 when the central government revealed its plans to set up a dedicated fund for agri-tech start-ups and promote the use of drones for crop assessment, digitisation of land records, and spraying of nutrients and insecticides. States are also doing their bit and positive developments can be seen in most states with a focus on data, public-private partnerships, and knowledge exchange with academic and research institutions.  

However, now is the time when start-ups need a renewed focus on profitability. The first wave of India’s agri-tech start-ups entered the space of market linkages with little competition but are now competing not only for farmers’ attention but amongst themselves and with the recent entrants.  As agri-tech becomes mainstream and investors tighten their purse strings in the medium term amidst an overall slowdown in global investment activity, only start-ups with a focus on profitability and sustainable growth will survive.

This slow-down also gives an opportunity to traditional players to either build or buy such capabilities, with the use case already proven by start-ups. Irrespective of the type of player, however, interesting times are ahead for the sector and adaptability and innovation will differentiate winners from also-rans.

(Rishi Agarwal is the Managing Director and Head – Asia, for FSG. Views expressed are the author’s own.)

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