According to a study, private equity investments in agri-tech start-ups have skyrocketed in four years (2017-2020), attracting 6,600 crores and growing at a rate of more than 50% per year. It also stated that the rural microfinance sector has grown significantly in the last 18 months, rising from approximately 1.22 lakh crore in December 2019 to 1.46 lakh crore in March 2021.
As per a study titled 'Innovation in India's Rural Economy: Disruptive Business Models are Stimulating Inclusive Growth in Agriculture and Rural Finance,' published jointly by Bain & Company and the Confederation of Indian Industry, significant domestic and international investments are being pumped into the sector to improve efficiency and access to credit (CII).
Solutions for Crop Health
Investors have prioritized opportunities that address systemic issues, create sustainable systems, and promote inclusive growth. Several global technology behemoths see this as a new growth opportunity and are investing in innovative solutions for crop health monitoring and yield estimation, according to the report.
"Disruption in India's food and agriculture will evolve from traditional agriculture to new farming models, advanced agri-tech services, and new food products," Parijat Jain, partner and leader of Bain's agri-business practice in India.
According to the study, agriculture is the largest sub-sector in the rural economy, accounting for approximately 37% of total rural GDP in 2019–20. In 2019–2020, the farm sector contributes 35 lakh crores to the national GDP. Proteins, fats, fruits and vegetables account for 60% of agricultural output value. Rice and wheat account for roughly 40% of total farmland in the country and account for a quarter of total production value.
New Business Models
New business models are emerging across the agriculture value chain, from inputs and harvesting to processing and distribution, as younger generations of farmers and farmer producer organizations (FPOs) become more digitally savvy, according to the report.
It cited Ninjacart, a supply-chain platform that built an online marketplace to connect farmers to retailers without the use of intermediaries, saying that such a platform provides pricing, demand visibility, and payment assurance to drive engagement and support farmers.
Improvement in Agri-Credit
According to the CII study, as traditional agriculture transitions to agri-business, there is a greater need for faster and better access to cash and credit. "While cash remains the dominant method of payment in rural India, Unified Payments Interface (UPI) transactions have more than doubled in the last year," the report stated. Access to credit has also increased significantly in the rural ecosystem. Agri credit has increased by 10% in the last five years, rising from 8 lakh crores in FY15 to 14 lakh crores in FY20.
