Digitalisation has infused a fresh breath into India’s agricultural philosophy
Digital technology and an influx of international investments are helping India’s agricultural sector reap rich dividends.
Agriculture makes up the backbone of the Indian economy. It directly contributes approx. 16 per cent of India’s gross domestic product (GDP), accounting for 11.9%* of the global agriculture Gross Value Added* (GVA) of US$3,320.4 billion and employs 43 per cent of the Indian workforce. Indirectly, the sector supports several other subsectors including food processing, logistics and retail.
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However, the Indian agricultural sector has been operating below its potential. Plagued by problematic supply chains, lack of infrastructure when it comes to transport of farm produce and lack of adequate access to markets and end consumers. Around 86 per cent of Indian farmers are small holders i.e., they have land holdings of less than two hectares. They also have limited access to technology, inputs, credit, capital and market.
Another problem is that the majority of agricultural production comes from small holder farmers and stock breeders who do not have the capacity or necessary technological support to improve farm efficiency.
A large quantity of India fresh produce gets destroyed in its journey between farm to table because of manual handling, repeated loading and unloading, poor inventory management, lack of adequate storage and slow movement of goods. Research by Mckinsey found that this wastage amounts up to around 60 per cent of food loss and waste in India.
South India’s First “Kisan Rail” flagged off from Anantapur (Andhra Pradesh) to Adarsh Nagar (New Delhi).The inaugural Kisan Rail loaded with Tomato, Bananas, Sweet Orange, Papaya, Muskmelons and Mangoes.https://t.co/Vlqk23gpqJ pic.twitter.com/VGCLr6h1uQ
— Ministry of Railways (@RailMinIndia) September 9, 2020
The Modi government has over the years introduced several policies, reforms and initiatives to bolster the country’s agricultural sector. In May, Indian Finance Minister Nirmala Sitharaman unleashed a spate of reforms aimed at liberalising the farm sector, complete with a $22-billion package to transform it over the medium term. This package is targeted at building farm gate infrastructure, freeing farmers from the clutches of the middlemen who have a stranglehold on the trade and allow stockists and traders to store food grains and crops without any limit.
The National Agriculture Market (eNAM), a pan-India electronic trading portal helps network the existing APMC mandis to create a unified national market for agricultural commodities. Another example is the $13.2 billion Agriculture Infrastructure Fund (AIF), launches in August 2020 will play a pivotal part in building post-harvest storage and processing facilities over the next few years. Similarly, the Kisan Rail, launched again in August this year, addresses storage solutions via the integration of cold storage containers within its design, which will help establish a seamless national cold supply chain of meat, milk, and fish. A multi commodity train, the rail also carries a variety of fresh vegetables and fruits, in addition to dairy and animal products. All of which provides a crucial first step towards reducing waste and losses for Indian farmers.
The more recent Farm Bills introduced by the government aim to “remove middlemen and let farmers sell their produce directly to buyers,” improving their prospects, especially in far flung areas.” According to a Reuter’s report, Modi’s September overhauls, potentially the biggest reform ever to India’s massive farm economy, let farmers sell to institutions and big retailers such as Walmart not just to regulated wholesale markets.
Digitalisation heralding a green revolution
According to report by EY titled Agritech: towards transforming Indian agriculture, released in August this year, the Indian agritech market potential is estimated at ~US$24b but currently has a market penetration is ~1%.
Digital technology such as AI, cloud computing, machine learning and IoT are heralding new and innovative solutions to India’s farms. NITI Aayog, the Indian government’s think tank, has been working with major global technology giants such as IBM, Microsoft, SAP and others to harness the power of artificial intelligence, data analytics, satellite imaging, the internet of things (IoT) and machine learning to improve yields, increase predictability and raise incomes of Indian farmers. While Indian start-ups are leading the charge in revolutionizing India’s agricultural sector.
“The proliferation of digital technologies and data, with increasing awareness among farmers, processors and marketers, has created a unique opportunity for India to reimagine the food ecosystem.” Akshaya Kamath, Director of Pioneering Ventures, an Indo-Swiss food, finance and tech platform company that is active in the agritech sector told India Global Business. His company has been active in India for over a decade now, and has been actively working towards shaping the modern food ecosystem, via improved end-to-end supply chain digitisation and promoting value-creating linkages.
Rapid digitalisation across India in addition to the availability of affordable mobile phones and ultra-cheap data have also made it easier for farmers to go electronic. For example, a Reuter’s report quoted potato farmer Rakesh Singh in Uttar Pradesh saying he is keen to get computer-enhanced tools to help his business in India’s most populous state. “Real-time prices available on live electronic trading platforms and easy-to-use trading apps for mobile phones make the process of price discovery and selling goods a transparent and hassle-free experience for us”.
Singh is looking forward to a trading app from Farmpal Technologies Pvt Ltd, a small firm based in western Maharashtra state, targeting heartland states with technology that connects producers directly with retailers, its software predicting market conditions and managing inventories accordingly.
Application of technology across India’s agricultural sector
Role of start-ups
According to EY, Indian agritech start-ups are operating in a market with an estimated potential of US$24b by 2025. Mark Kahn, managing partner of Omnivore Capital, a venture capital firm that funds farm-tech companies, estimates $1 billion will flow into India’s agritech sector each year with startups growing 20% to 30% annually.
Nukul Upadhye, co-founder of Bijak, an agritech startup, told Reuters: “We provide farmers with a data set of good, reliable buyers from far-off places willing to pay a premium for the produce of their choice and quality. That way, we help both farmers and their buyers.”
Several international players are now jumping into India’s agricultural sector, keen to get in on the action. Sequoia Capital and Tiger Global have funded agritech start-ups that aim to run the entire food supply chain. Some firms will develop AI tools for assaying and warehousing, others will offer electronic platforms to connect farmers with mom-and-pop stores and large retailers. The Middle East has been at the forefront on investing into India’s agritech revolution. With a proposed $7 billion tranche of investments, the India-UAE Food Corridor is heralding a massive growth in the agriculture sector is expected to create more than 200,000 jobs in India. In addition huge investments in to Indian start-ups such as FreshToHome, ShipsKart, Loktra and CropData by heavyweights such as theAbu Dhabi Investment Office (ADIO), Dubai Technology Entrepreneur Campus (Dtec) and Dubai Multi Commodities Centre (DMCC) respectively.