How can agri based startups completely transform the rural economy?

India suffers from a very low farm productivity due to variety of reasons, one being the lack of access to technology. About 85% of the farmers hold less than t

A recent study carried out by Bain Capability Centre and the Centre for Innovation, Incubation and Entrepreneurship(CIIE) at IIM, laid emphasis on the increased activity in the farming-as-a-service (FaaS) space by private equity funds as well as venture capitalists. Earlier in the year, CIIE also launched the Bharat Innovations Fund with AgTech being the prominent area of focus. 

India suffers from a very low farm productivity due to variety of reasons, one being the lack of access to technology. About 85% of the farmers hold less than two hectares of land and earn a meager Rs.6400 per month on an average. The demand for food has been growing constantly but the supply is constrained by the marginal productivity gains in majority of the crops, which is due to the erratic monsoon patters, the supply chain inefficiency and the shrinking arable land. Farming-as-a-service aims to provide affordable solutions to the technical and mechanized farming. It makes the fixed costs variable for farmers and makes it more affordable for majority of the small farmers, which dominate the country. Its services are available on a subscription or pay per use basis divided into three categories.

  1. One of the most popular farm management solution is sharing of information through SMS, phone calls, e-mail or mobile apps. The information includes various alerts on the weather, real time crop monitoring, input and output market prices and data analytics that makes the information valuable and actionable.
  2. Production assistance which refers to the aiding of farming activity with technological resources on site.
  3. Access to market solutions through the online platforms that allow to connect the forward and backward supply chains with the farmers. This helps them procure quality farm inputs and cut out the intermediary layers.

Some solutions are globally adopted and technology driven which are tweaked for Indian farmers given their smaller holdings. FaaS has the ability to transform the entire sector by making it more efficient, productive and market driven. The Government is focusing on cheaper, institutional credit to farmers in order to improve the infrastructure and to allow digitization of transactions to put farming on a sustainable path. The increasing mobile connectivity has spurred up the startup activity, large corporates and investors have stepped up their efforts to bring benefits to the farmers as well as the businesses.

Global investors have also pumped in millions of dollars through venture capital and private equity investments. India has seen a sharp rise in entrepreneurial and investment activity in the last four years, with the number of startups in this sector doubling in this period.  Enthusiastic brokers are calling this India’s second green revolution and it is expected that entrepreneurial activity will pick up further with the big corporates like Mahindra and Mahindra Ltd, TAFE and John Deere vying for this opportunity. This sector has huge potential for investors to transform the agricultural and economic fortunes of the country, which has remained excluded for many years. 

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